Gold Value Calculations - The Formula We Need to Break:
G'day again and welcome to my special three part submission on just how appraisers and Valuers arrive at an appraisal or Valuation Replacement price by using formulas and calculations to arrive at a final figure.
It is during this process that we can understand just what we have to do to arrive at a valuation or GOLD VALUE based on four parts of the appraisers puzzle.
The first thing you have to do is find out the price of Gold today. While this is NOT absolutely necessary nor does it need to be done to the very cent - we do need a benchmark figure to start with.
Generally this price can be found around the Internet such as Kitco or any of the finance sites like Yahoo etc. You may even hear it on the evening news or quoted in the paper. Either way, it's simply the starting point to our gold value calculations.
As we are going to use a wedding ring in this example, even though the same system applies to bracelets, chains, bangles and necklaces, earrings and brooches or mens jewelry like cuff-links or tie-bars, we are going to keep it very simple and basic.
In fact I am going to use my own wedding band in this case study because it 'fits the bill' as it were.
It has NO gemstones - remember we said that this system of valuation would only work on items which does NOT have diamonds or gemstones of any type. It also can be considered quite plain and without any handmade workmanship of any kind.
If you needed these things taken into the Gold Value Calculation then you would need an enhanced version of this formula - which is actually available - or you would need to complete an Online Jewelry Appraisal (available at the website) or see your local qualified and FRIENDLY jeweler-appraiser-gemologist.
- The Wedding ring is made from 9 carat (karat) gold and is in yellow gold and weighs 5 grams.
The ring, together with the price of gold is all we need to break this formula down. Please remember though, that gold fluctuates daily and that is why many appraisers and valuers use a kind of moving average price to 'Smooth Out' the hills and troughs in the price to avoid the spikes seen in gold.
After all - you wouldn't expect to see the price of gold jewelry change in the local Shopping Mall and High Street Jewelers on a day by day basis would you? Just because Gold went up (or down) last night doesn't mean the prices of wedding bands will be different tomorrow in the jewelers window.
So lets take a simple value based on today's price - which at the time of writing is approximately $883 US Dollars per ounce and is sometimes referred to as the 'Spot Gold Price'.
So lets use that figure in our example as we break the Gold Formula down...
The actual formula is this: G/32/24xQxW
That is: G divided by 32 divided by 24 multiplied by Q and multiplied by W Phew!
Now remember the Golden Rule (hey another pun!) DON'T PANIC...
Let's take each part and Break it into something we can understand. This is supposed to be 'Simple' right?
- The G part at the beginning of the formula is just the price of gold today (833)
- The Q part near the end is the Quality of the gold you are evaluating (9)
- The W on the end is the weight of your jewelry (5)
Told you it was easy...
The 32 and the 24 I'll explain shortly. Stay with me here - you'll soon get the hang of this.
So - lets substitute the numbers into the formula for the Wedding Band example. If you are using your own jewelry item, then change the numbers for your item, although it might help to go through my explanation first.
The formula ( G/32/24xQxW ) becomes: G=883 the spot price of gold, with Q=9 the quality of the ring (9 carat) and W=5 which is the weight of the band.
This all comes out to... 883/32/24x9x5 Let's break it a little more.
The 32 is equal to the number of grams in one ounce and the 24 is equal to the number of carats in pure gold.
So that's it - that's how it works. Or to put it in one sentence...
$833 dollars for 1 ounce of pure gold is divided by 32 grams to find out what the value is of one gram of PURE gold and therefore is divided again by 24 to discover what 1gram of 1 carat (karat) of gold at today's price is worth.
Then all we have to do is MULTIPLY that figure by the quality in our jewelry (which was 9 carat) because that gives us 1 gram of 9 carat gold at today's price - and then multiply THAT by the weight - which was 5 grams.
ie: $51.738275 in basic gold value - Told you it was easy.
But we have NOT yet arrived at the retail or replacement price yet, because this is based on the 'Spot Price' of gold and NOT the price in the shop window.
For that we will have to look at the final part in this three part series to see how the jewelry trade all make money before you buy it.
There is also a far easier way if you use the Gold Value Calculator Tool available on the Website. But we'll keep that for the next lesson in this series on How To Discover Your Gold Value
David Foard has spent over 35 years in the Jewelry Trade as a qualified gemologist and member of the Valuers Council and is currently the resident appraiser and software developer at the Jewelry Appraisal Center.
To find out more about doing an Online Jewelry Appraisal for yourself, go to his main website at: http://www.online-jewelry-appraisals.com/ where there are hundreds of articles, hints, tips and secrets to jewelry and gemstone valuations.
You can also sign up to get discounts and specials including the Gold Value Calculator available here: http://www.online-jewelry-appraisals.com/gold-value-calculator
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