All That Glitters

Gold buyers have multiplied as prices soar, but who's really profiting?


The new American gold rush is on, though scarce is the prospector with a pan, shovel and pickaxe heading toward the virgin countryside to break dirt. Contemporary precious metal hunters are instead combing through dresser drawers, jewelry containers, boxes, buckets and other dusted receptacles stowed away in the neglected corners of their own households. And rising in conjunction with this new crop of domestic prospectors is a burgeoning industry of “cash for gold” precious-metal buyers, who are popping up in commercial neighborhoods, shopping malls, hotels, outdoor entertainment venues—even supermarkets.

Buyers say they’re helping the community by paying top dollar to consumers in need of cash. But some contend the business is tainted by dishonesty, while law enforcement says pervasive gold exchanges are spurring crime.

While gold and silver buying is nothing new—pawn shops, jewelers and coin collectors have long dealt in items made of precious metals—recent years have witnessed a boom in gold prices, and with it, an industry of merchants focusing strictly on acquiring the metals themselves, without consideration to craftsmanship.

In contrast to jewelers and traditional pawn brokers, who tend to sell precious metal in the form of jewelry and other trinkets, cash-for-gold merchants typically pool their takings and resell them, in bulk, as scrap metal.

“The bottom line is, what we buy is eventually being melted down,” says Steve Bernard, a buyer with the Exchange, a precious-metal shop that opened two months ago inside G&G Supermarket in Santa Rosa and Petaluma. “It can be a jewelry heirloom or broken pieces of metal—for us there’s no distinguishing. It’s all metal.”

Metals go to a refinery and then through multiple distributors after they leave a gold buyer, Bernard says, explaining that the metals commonly end up with manufacturers who use them in products such as decorative pieces, computer circuits, conductors for high-end audio-visual equipment and aeronautical parts.

The Exchange, which has no storefront except for a wooden imitation prospector’s cart that rests incongruously near the beeping checkout stands at G&G, fielded a steady stream of customers on a recent weekday.

Ed and Colleen Grant brought in sundry bits of jewelry and walked contentedly away with several hundred dollars. Ed said he’d previously sold four gold teeth that he found while cleaning the basement, 20 years after having them extracted.

“In the ’80s, gold was cool, but I don’t wear this anymore,” said 47-year-old contractor Kevin Cuellar, as he waited in line with a gold chain. “If I had more gold, I’d sell that, too.”

The reasons customers give for selling run the gamut, but, unsurprisingly, most cite financial hardship. Sky-high gold prices certainly help, coupled with widespread news reports trumpeting the revival of valuable metals. And then there’s the divorce rate.

“The most common thing we get, probably, is the defunct wedding ring,” Bernard says. “I just ended a nine-year thing myself, and I had a ring that said ‘Love Always’ from so-and-so, and I sold that. But times have changed, man. The last time I went through something like that, I just threw [my ring] in the bay.”

On another recent weekday, 25 people sat or milled around outside a conference room at the Hilton hotel in northern Santa Rosa, all waiting their turn for an appraisal by America’s Antique Roadshow, a precious-items purchasing company that conducts buys in hotels across the country. (This was one of two such shows occurring that same day in Santa Rosa alone; Secured Gold & Silver Buyers held a similar event at the Hyatt Vineyard Creek Hotel on Third Street). Kerry Vaassen, a buyer with America’s Antique Road Show, said her three-year-old troupe travels to hundreds of towns each year and averages about $250,000 in purchases at each stop.

A waiting list inside indicated that between 9am and 1pm, over 170 hopeful sellers had signed up; some weary guests professed to have been waiting an hour and a half for their turn. Among the items brought were gold and silver jewelry sets, old silver dollars, watches, vintage kitchenware and war memorabilia.

“I’m at an age where I realize I can’t keep all I have, and I’ve been selling the family jewels,” said 66-year-old Santa Rosa resident Marcia Singer, whose carry-in included silver goblets, a gold necklace and a two-dollar bill from 1870. Singer, a former nightclub entertainer and caregiver who was recently downsized, said she’d recently sold a diamond-studded gold ring for $2,600 to pay for dental work.

“A lot of us these days are selling a lot of stuff, but it’s questionable how many of us are educated enough or have the time to do the research on what the actual value of that stuff is,” Singer said. “It’s wrenching when you have to learn to surrender things that hold value in your life. I cried when I sold my ring, but after it was done I felt a real sense of freedom. You let go and you let go.”

Vaassen and an executive with Secured Gold & Silver Buyers both cited safety from criminals and low overhead as reasons for posting up in hotels instead of establishing permanent storefronts. Steven Segal, the owner of the Exchange, mentioned those same reasons for setting up inside a supermarket. “This is a community market where people are going to feel safe,” Segal said.

For some, the possibility of danger is more keenly felt. Cash for Gold, a downtown Santa Rosa storefront, was robbed at gunpoint in September. One buyer interviewed for this story says he keeps a shotgun at his store for protection.

Sgt. Michael Lazzarini, a detective with the Santa Rosa Police Department’s property crimes division, says two erstwhile gold-buying kiosks at the Santa Rosa Plaza have been targets of multiple after-hours burglaries.

One of the kiosks closed when the owner moved his business; the other, according to Lazzarini, was shut down in August after a police investigation found that customers weren’t filling out the paperwork required of all California pawn outfits. To help prevent and track the resale of stolen items, any type of pawn outfit must obtain certain information from sellers, including a driver’s license photocopy and fingerprint.

Lazzarini says local police departments have seen a surge in stolen jewelry reports over the past couple years, which he attributes to skyrocketing gold prices. The most popular stolen items used to be stereo equipment, firearms and money, but now, he says, “Jewelry is the primary motive for burglary,” he says.

“There are a lot of options out there to get rid of that stuff. Trying to keep tabs on all of it becomes very difficult. Before, we only licensed to bread-and-butter pawn shops; now we’ve got companies from all over the place. They might show up at a hotel, have a gold exchange in town and then they’re gone after a week—back to Wisconsin or something.”

Another unique problem for law enforcement with cash-for-gold is the impossibility of tracking metals once they’re reduced to scrap, which leaves police with a short window to investigate the whereabouts of stolen items, Lazzarini says. Complicating the problem further are sellers who recognize this loophole and smash their stolen jewelry into unidentifiable pieces before ridding themselves of the scraps, he adds.

Buyers interviewed in Santa Rosa and Petaluma profess to paying anywhere from 70–92 percent of gold’s “spot” (standard) value, which today is over $1,600 an ounce (it averaged $1,410 an ounce in 2010; $513 in 2005 and $273 in 2000). By comparison, pawn shops in San Rafael, Petaluma and Santa Rosa gave figures in the 25–60 percent range of standard prices. Gold buyers say they can pay more for precious metals because selling the accumulation as bulk scrap metal yields more money than just reselling individual trinkets.

An experiment by the Bohemian yielded a range of offers on a gold ring embedded with a tiny opal stone. (Purchased in 1999 for $200, the ring weighed about 2.95 grams, based on a conversion formula for the 1.9 “penny-weight” provided by the buyers.) Of the two cash-for-gold shops that appraised the ring, one offered $75 and the other $39, while a jeweler offered $81 and a pawn shop $45. The jeweler said the ring would retail for about $400.

Santa Rosa resident Kathe Close, one of 120 local gold enthusiasts belonging to a decades-old club called the Santa Rosa Gold Diggers, says she considers claims by gold buyers of paying 80–90 percent of spot prices “an outright lie.” Close says an appraisal she received two years ago on a gold necklace constituted less than half the gold buyer’s advertised percentage, adding that she’s heard similar stories from other Gold Diggers.

In contrast to the home-scrounging performed by modern-day gold sellers, the Santa Rosa Gold Diggers practice old-fashioned prospecting—mining, digging and sifting in various patches of California gold country to extract the precious ore, Close says.

The club’s most gung-ho prospectors camp out in gold country for weeks at a time and sometimes acquire up to $5,000 of gold inside a single month, Close says, adding that club members typically pool their findings and sell them to the same refineries utilized by cash-for-gold merchants (refineries will only purchase metals at a certain quantity). Close says the Gold Diggers typically get about

80 percent of spot value, adding that percentages paid by refineries typically vary depending on the amount of gold sold.

“A lot of these guys in our group are doubling what they made even four, five months ago,” Close explains. “These are guys who are really eager to share their techniques and help one another.”

As for the new American gold diggers—the ones scouring drawers, attics and boxes, and rushing to the nearest pop-up buyer? “People are desperate, and whatever price they get they’re saying, ‘Well, that’s better than nothing,'” Close says. “But they’re usually getting ripped off.”

Sonoma County Library