Gold prices skyrocketed during the past two years, doubling from slightly more than $700 an ounce in October 2008 to roughly $1,400 when the market closed Wednesday, according to MarketWatch.com.
Several shops dedicated to buying precious metals have sprung up in the Myrtle Beach area, and many jewelers began buying gold to take advantage of the record high prices. Mail-in services also urge TV viewers to send in their gold to get fast cash.
With so many gold-to-cash businesses popping up, sellers need to be careful and do their research to avoid being ripped off, trade group representatives say.
Masouras sold her jewelry at The Gold Exchange, 1220 U.S. 17 South in North Myrtle Beach, which opened in September last year. Owner Jan Neely started the shop after closing her traditional jewelry store in Naples, Fla. The shop still sells jewelry, but buying gold has become 99 percent of her business with 2 to 10 people selling on an average day, she said.
"It's another way to keep my jewelry store open because it does bring in the revenue," Neely said.
The players
A host of companies like Neely's have sprung up or expanded as gold prices have soared. The local yellow pages contained two gold-related listings in April 2008. But in the following year's phone book, six companies are listed. Half of those are mail-in services, with large ads showing gold jewelry and women holding $100 bills.
Brick-and-mortar stores and mall kiosks have also opened in the past year to take advantage of the high gold prices, competing with pawn shops, the traditional buyer of used jewelry.
Pawn shops have a certain image that just doesn't appeal to some sellers, said Tom Pate, owner of The Pawn Shop, 3624 Socastee Boulevard.
"A lot of people won't go to pawn shops, a lot of them just won't. Especially a lot of your older people," Pate said.
Pate opened four shops - two in Myrtle Beach and two in Conway - dedicated to buying gold, silver and platinum in the past year or so. The stores aren't a get-rich-quick scheme, but rather make a small profit buying the metals and melting them down, he said. The shops do not resell jewelry.
"We're not getting rich on it, no. We're making money, we're paying a person to work and we're renting buildings," Pate said. "That's helping them people. We're putting people to work."
Neely said customers generally fall in one of two categories, she said.
"I have half my customers that need the money and it's a way for them to put food on the table," she said.
The other half are people like Masouras who have old gold jewelry that they never wear, she said.
How it works
The Gold Buyers America kiosk that opened at Coastal Grand mall in August buys about 20 to 35 gold items in a week, staffer Jill Arnold said.
Gold Buyers America and The Gold Exchange examine the gold with a loupe, a special magnifying glass, and find the stamp that tells how many karats the jewelry is. The two shops will then rub the gold on a jewelers stone and drip special acids on the scrapping, also to discern the karats. Gold Buyers America will also test the jewelry to make sure it's not magnetic, a sign that it contains a large amount of other metals.
If the gold passes the tests, the shops will make an offer based on the pennyweight of the gold, a unit of weight equal to roughly one-twentieth of an ounce.
Prices per pennyweight vary daily with the overall gold market, said Tavis Meredith, who oversees Gold Buyers America's operations in South Carolina. Meredith said he could not discuss pricing for competitive reasons, and kiosks will often raise their offers to match or beat competing offers on a gold item.
Fast-Fix Jewelry Repair in Coastal Grand Mall prices about five gold items a day, paying from about $40 to $1,500 for a single item based on the weight, said manager Samantha Reynolds. The shop buys a lot of jewelry and watches but also unusual items such as gold teeth, she said.
The money may sound appealing, but people should think it through before selling their jewelry, said Amanda Gizzi, spokeswoman for trade group Jewelers of America. People should avoid making hasty decisions as they generally will never be able get their jewelry back once it's sold, she said.
"One very important thing is to consider any emotional value it has to you because certainly no one can put a price on that," Gizzi said.
Sellers should not be surprised if their jewelry is appraised at lower than the open market price for gold, said spokesman David Schraeder of industry group World Gold Council.
The market price gives the value of pure 24-karat gold, and a lot of U.S. jewelry is 10 karats or 14 karats, he said. A 10-karat gold necklace contains 10 parts gold and 14 parts of another metal.
Businesses also must factor in how much it will cost to process and melt down the jewelry, which can also lower a shop's offering price, Schraeder said.
Sellers should nevertheless go to several different stores to ensure they get the most money they can for their gold, he said.
Schraeder and Gizzi said sellers should research a business before they decide to sell their gold there. Businesses affiliated with the World Gold Council, Jewelers of America or the Jewelers Vigilance Committee should be reputable. The Better Business Bureau will know of complaints against a jeweler.
"We always recommend people do their business with reputable jewelers rather than these pop-up stores and mail-in programs," Gizzi said.
Mail-in programs may be reputable but should be researched in advance, Schraeder said.
Business or bubble?
Rising demand and a steady supply of gold accounts for the rising prices, Schraeder said. About 34 percent of demand for gold comes from investors, a figure that's increased in recent years, according World Gold Council statistics. People view gold as a safe investment, especially in the tougher economic climate, Schraeder said.
Gold jewelry, which makes up about 54 percent of total demand, is increasingly bought in China and India, which drives demand, Schraeder said. Both countries have growing middle classes that have discretionary income and place high cultural value on gold, he said. The remaining demand is driven by technological or industrial uses of gold.
Meanwhile, gold production remained relatively stable, as it's hard to increase production when most gold that's easily accessible has already been mined, Schraeder said.
A study by the World Gold Council addresses concerns that gold is a new economic "bubble" and that prices will fall drastically. The study says that the rise of gold doesn't present the same risk factors of previous bubbles, comparing it to the U.S. housing bubble and the dot-com boom, among others. But Schraeder said he can't say for sure that it's not a bubble.
"The hard part of any kind of asset bubble is it's very, very difficult to ever know if you're in a bubble until you're out of a bubble," Schraeder said.
Pate said he doesn't think gold prices can stay high forever, so his shops may not be a sustainable business model in the long run.
"I'd still like to see them be permanent locations, but I don't think they're going to be," he said. "Right now I would say it's going to be a fad."
Investors view gold as a hedge against inflation, said Rob Salvino, a research economist at Coastal Carolina University. Fears of inflation are running high after the Federal Reserve announced last week it would buy $600 billion in Treasury bonds to inject more money into the sluggish economy, a move that could lead to inflation, Salvino said. Only if the Fed successfully curbs any resulting inflation would investors stop pouring money into gold, and prices could come down, he said.
But that would be at least a two years away, Salvino said, so gold-to-cash stores will likely remain for now.
"As long as gold is rising in price those businesses are going to be around to take advantage of it," Salvino said.
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