Tread carefully before you catch gold fever

Jewellery and pawnbroking sites are booming – but do their deals measure up? Or are there wiser ways to get a good price for your treasure?

Pawnbrokers and jewellers are proving to be winners in this recession. The price of gold is still at or near its record highs, and there is a ready supply of people willing to sell. The UK has already seen the arrival of US business Cash4gold.com and, in recent months, new gold recycling websites such as Postgoldforcash.com and Buyorborrow.co.uk have also been launched.

The way these websites operate is fairly straightforward. Applicants are sent an envelope which they then send back via Royal Mail Special Delivery with insurance of up to £500 (although some websites offer the option of additional insurance). Once the items have been received, the company gets in touch to give a price. If accepted, the money is sent within a few days; if rejected, the items will be sent back free of charge.

"Reasons for selling are varied," says Ashley Faull, the founder of Postgoldforcash.com. "Obviously, the recession and loss of jobs plays its part, but so does the end of relationships. We even get single earrings, where the other one has been lost."

Jewellery giant H Samuel recently joined in too, launching a gold recycling service on its website. Customers can send in white, yellow and rose-gold jewellery, from 9ct to 22ct, to be valued by a trained jeweller. If they are happy with the valuation, a cheque is sent within a few days.

Buyorborrow operates slightly differently in that you estimate yourself how much you think an item is worth. You can also borrow against the item if you decide you don't want to sell, like a traditional pawnbrokers. "We give you a choice. You can take out a loan or you can sell us the item," says Steve Marsh, one of the founders of Buyorborrow. But the interest rates – while below those of many doorstep lenders – are eye-watering. For example, £1,000 borrowed over a month is charged at a whopping annual percentage rate (APR) of 60.45 per cent. Loans of £1,000 to £5,000 are charged at 45.85 per cent APR.

Understandably, many people are wary of sending jewellery through the post, so are these sites really the best way to sell unwanted jewellery? You may well be getting a speedy, uncomplicated and discreet service, but with these benefits come significant drawbacks. First, some items are sure to be lost in the post. But by far the biggest problem with these sites is that you are unlikely to be getting the best possible price for your gold.

"In August alone, 14 operators were advertising for gold purchasing on TV," says Steve Fenerty, the commercial director of pawnbrokers Harvey & Thompson. "The safest thing you can do with your jewellery is take it to someone, have them assess it in front of you and get a price face to face."

Still, there are ways to avoid getting stung when it comes to selling gold jewellery. Ask yourself some key questions. Is the company recommended by credible sources? How long has it been around? Knowing at least the basics behind the gold valuation process is also vital. Most people will offer a price based on carat, so know your hallmarks. For example, 375 denotes 9ct gold and 916 denotes 22ct gold. How heavy the item is also makes a difference and most firms advertise their pay per gram, which should give you an idea of what price to expect. If you're tempted to use an online company you may want to get a couple of valuations from high-street jewellers first.

Be wary of selling antique gold jewellry, which may be worth a lot more than its weight might suggest. If you're at all unsure get it valued by a reputable antiques jeweller. The internet is a useful tool when looking at online pawnbrokers or gold recycling firms. Search for blogs and other sources to assess the reputation of any websites you're considering selling to. Always read the terms and conditions carefully to be sure that the returns service is fair. Companies should offer to return items free of charge if you are unhappy with the valuation.

If you're put off by the idea of posting your items, you may like to try another US phenomenon that's made its way to the UK. OuncesPounds runs gold parties in which a host assembles friends and family for a bling version of a Tupperware party. Unwanted gold jewellry is valued by an OuncesPounds representative who then makes an offer for each item. Hosts earn commission of up to £350 per party.

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