Melting gold into ingots: real losses versus an 18-euro payout

Melting gold into ingots: real losses versus an 18-euro payout

Do you really lose gold when you melt it down? The question, seemingly technical, hides a business worth billions a year. A private individual gathers between 50 and 80 grams of inherited jewellery and runs into a jeweller who offers him 18 euros per gram and warns him that melting it down is not worthwhile because «4 or 5 grams» evaporate. The suspicion of a rip-off is reasonable: gold does not evaporate, but the answer is not that simple. According to the calculations circulating in the thread, the price of 18-karat gold is around 27 euros per gram, while pure gold exceeds 40. The difference between the two explains why the gold-buying business is hardly charity.

What melting losses are and why gold does not evaporate

Gold does not evaporate at blowtorch temperatures, but the alloy does suffer losses. In jewellery-making this is called «losses»: the metal lost when filing, polishing, soldering or pouring the crucible. One participant puts those losses at between 3% and 5% in artisanal processes. Another states that in industrial smelting the accepted loss for silver is 0.35%, although here it is applied at between 0.4% and 1%. The gap between that figure and what the jeweller in the case claims —up to 10%— is too wide.

There is another factor that complicates the calculation: purity. 18-karat jewellery contains 75% pure gold; the rest is copper, silver or other metals. When melted, those metals oxidise or separate, and the final weight of the ingot is lower, but its fineness is higher. One participant recounts melting a 750-fineness piece and obtaining 870: he lost weight but gained purity. The jeweller who says «4 or 5 grams» are lost from a small sample is confusing real losses with alloy.

The gold-buying business: 18 euros per gram versus 40

The offer of 18 euros per gram for 18-karat gold is far below the market price. According to the calculations circulating, 18-karat gold is paid at around 27 euros per gram; 24-karat, at 40. A quick calculation: 75 grams at 27 euros is 2,025 euros. At 18 euros, 1,350. The difference, 675 euros, is the margin pocketed by the middleman. It is not an isolated case: the gold-buying business has multiplied in recent years on the back of the metal's bubble.

The alternative of melting at home with a blowtorch is tempting, but there is a catch. Without temperature control, the gold oxidises and losses skyrocket. What's more, selling small 24-karat ingots requires certification and a buyer. The informal market pays less for melted gold without guarantees than for the original piece of jewellery. An antique piece or one with stones may be worth more as an object than as metal.

Selling on eBay or to a gold buyer: where the best price is

The eBay platform has become an alternative channel for selling gold at market price, with low fees. The problem is the risk: shipping, disputes, counterfeits. Gold buyers offer immediate liquidity, but at the cost of a discount of 30% or more. The decision depends on urgency and volume. For 50 grams, the difference between the two channels can exceed 500 euros.

The debate over the gold bubble hangs over the whole operation. Some argue that the price is at historic highs and that selling now is sensible. Others warn that the gold-buying frenzy will not last forever and that the metal will keep rising. What nobody disputes is that melting jewellery down to sell it as ingots is not profitable for a private individual: refining and certification costs eat up the margin.

In the end, the individual sold his 18-karat gold at 40 euros per gram. A price that, according to the calculations circulating, corresponds to pure 24-karat gold. Either the buyer did not know what he was buying, or the seller did not know what he was selling. In the gold market, ignorance always has a price.