Today's conundrum is why sell gold for scrap at auction? I'm browsing tomorrow's catalogues and there's a prime, real life example facing me. It's a broken piece, in 15ct gold. It weighs enough to be worth a fraction more than £1400 at today's (June 2025) scrap price. It is estimated by the auction rooms at £900-1100, an estimate that acknowledges that it has scrap value only.
If you were selling this, and had bought that into me, I would have given you the £1400+ straight away, delivered into you bank account by BACs while you were in the shop.
But its going to auction tomorrow. Scrap gold sales are predictable, so lets see if I can predict what will happen (I'll add an update after the sale)
It's broken, therefore I'm not going to pay more than the scrap value. Also bear in mind that I have to pay a commission of 30% or more. So that total valuation of £1400 (by me) has to take account of these charges, which arithmetically means my maximum bid is £1076. However, auctioneers only deal in round numbers so I'd go to £1100 hammer, which equals £1430 net after fees are added.
But what the buyer sees is the hammer price of £1100, and their own selling fees have yet to come off. Normally, these are around 20% but can be (a lot) higher, but let's say this auction room is one of the good ones. So the seller's arithmetic goes like this: £1100 – 20% fees = £880. That's what they get. And payout of this figure is usually 28 days later (most auction rooms pay out a month after the auction).
This means that the seller will get 63% of the real value of the item (£880/£1400). Yet they could have walked in here and got 100% of the value in minutes. Seems like a no-brainer to me, yet people continue to consign gold to auction.
OK, yes I accept that there may be special circumstances, the most common being its from a deceased estate. But I'd like to suggest that selling gold at auction, for the vast majority of us, is the equivalent to throwing £20 notes onto a bonfire. And you wouldn't do that, would you?
PS. Same principal works exactly the same for gold coins; sovereign, half sovs etc.
PPS. Of course it is always possible that someone bid it higher than I've predicted. But how high does the hammer price need to be for the vendor to realise today's £1400 scrap value they could have got from me? The answer is £1750 hammer, which equates to £2275 for the buyer including fees, for a piece worth £1400. That's 163% of its actual worth. The equation simply doesn't work this way round either.
And one last thing before the update in a couple of days: it's broken. So there is every chance it will go for less than the top estimate. Oh dear, the vendor risks getting even less value from it.
UPDATE: £1200 hammer. So £1560 cost to buyer (exc delivery) or about 11% over scrap, while the seller gets £960 or about 22% less than scrap value on the day I wrote this. Since then gold has dropped about 2%: a few pence per gram.
