Buying Used Gold From Customers: Weighing, Testing, Pricing

The buy price for used gold is usually “net gold weight after removing stones and non-gold parts, converted to a base purity, × the shop’s buying rate”; the original making charge is normally not counted. For the shop, the job doesn’t end with paying the customer: every purchase must be recorded on a purchase invoice with weight and purity, and kept apart from new stock until it is melted or resold.

Buying second-hand gold from customers is a routine part of every jewelry business; sometimes the customer needs cash, sometimes they want to swap an old piece for a new design. This seemingly simple deal also carries the most risk: unknown purity, hollow or plated pieces, stone weight and even stolen goods. This guide walks through the process from counter to ledger, with hypothetical figures in Iranian toman (1 toman = 10 rials). The method applies wherever you trade.

Old Gold, Second-Hand Gold and Scrap Gold: What’s the Difference?

In everyday speech these terms are used interchangeably, but for the shop each one ends up somewhere different:

This distinction matters at the moment of purchase, because it affects the rate you offer and where the piece goes in your stock.

How to Buy Used Gold at the Counter, Step by Step

1. Identify the seller: record the seller’s details. Check exact ID and record-keeping requirements with your local gold and jewelry guild or regulator.
2. Visual inspection: look at the hallmark, solder marks, hollow sections, non-gold springs or clasps, and stones.
3. Remove or estimate non-gold parts: the weight of stones, gems and other metals must come off the gold weight.
4. Weigh: on a calibrated scale, in front of the customer; read and write the weight to the milligram.
5. Test the purity: using one of the methods below.
6. State the price and deductions: tell the customer your buying rate and any deductions before agreeing.
7. Issue a purchase invoice: with weight, purity, rate and amount, confirmed by the seller.
8. Pay and label: pay the amount and store the piece separately, labeled “used” with the invoice number.

How to Test the Purity of Second-Hand Gold

A hallmark is a starting point, not proof; it can be worn, fake or apply to only part of the piece. Common testing methods:

For small buys many shops rely on the first two methods; for heavy or suspicious pieces, the cautious approach is to fix the final purity after an assay, or buy at a more conservative purity. Whatever you choose, tell the seller.

How to Calculate the Price of Used Gold (Worked Example)

Hypothetical example: a customer brings an old bracelet weighing 12.400 g in total. The stones are estimated at about 0.600 g and testing shows 740 purity. The shop’s assumed buying rate for 750 gold is 3,900,000 toman per gram.

If an inexperienced salesperson assumes 750 without testing and multiplies 11.800 g by the rate, they pay 46,020,000 toman, which is 612,300 toman more than the gold is worth, in a single deal. Forget to deduct the stones as well and the gap grows. Follow the purity conversion with the ready-made table in our gold karat conversion guide.

Deductions and the Gap Between Buying and Selling Rates

Almost every shop buys customers’ gold at a lower rate than its selling rate. The gap covers remaking, melting, testing, purity risk and the capital tied up until resale. Things that can affect the buy price:

• The spread between the buying and selling rate.
• Deducting the weight of stones, gems and non-gold metal parts.
• Allowing for solder or impurities in repaired pieces.
• Different terms for a cash buy versus a trade-in for new jewelry.

Which deductions apply, and how much, is each shop’s policy; there is no universal figure. What matters is that your policy is written down, applied the same way by every salesperson and explained to the customer before the deal. As we explained in our article on the gold making charge, the making charge the customer originally paid is normally not refunded in this transaction.

Trading In Old Gold for New Jewelry

A trade-in is two deals at once: you buy the old gold and sell the new piece. The cleanest way to record it is two separate invoices, one purchase and one sale, with the difference settled in the customer’s account. If you issue a single sales invoice with a “discount”, the old gold that came into the shop never shows up anywhere in your stock. Sometimes the agreement is to deduct the old gold by weight from the new piece’s weight; even then, the incoming weight and its purity must be recorded separately.

Recording a Used-Gold Purchase in Jewelry Store Accounting

A complete purchase entry has three effects:

• The “used gold” stock group increases by the weight, at the tested purity.
• Cash or bank decreases by the amount paid, or, in a trade-in, the customer’s account is settled.
• The purchase invoice is filed with the seller’s details.

The story doesn’t end at melting; it starts again. Suppose in one month you bought 50.000 g of used gold (750 equivalent). Good pieces weighing 6.200 g are pulled out and go back to the showcase, and the remaining 43.800 g is melted. The melt produces a 43.500 g lump assayed at 752, equal to 43.616 g at 750. The 0.184 g difference is that melt’s loss and should be recorded as such, not left to vanish into stock. Repeating this entry monthly shows you how much loss the workshop you use typically produces. All figures are hypothetical.

What Should Software for Used-Gold Buying and Melting Cover?

Whatever system you use for this part of the business should at least handle purchase invoices with weight and purity, automatic karat conversion, and recording what goes into and comes out of each melt. Zaran, P-Soft’s gold accounting software, has purchase invoices that calculate weight, purity and price from the Start plan; the Pro plan adds melting and separation, which records the input and output of every melt line by line. That means the scenario above, from purchase to melt loss, can be followed in one system. Note that Zaran’s interface is in Persian and it is designed around the Iranian gold market.

Risks and Controls When Buying Second-Hand Gold

• Stolen goods: record the seller’s details and an invoice for every purchase, and follow your local trade regulations.
• Plated or filled pieces: be extra careful with heavy pieces offered at a tempting price, and test more thoroughly.
• Internal error or abuse: purchases recorded with manipulated weight or purity by your own staff; regularly compare used-gold stock weight with purchase invoices.

More internal controls are covered in our guide to fraud control in gold shops.

Frequently Asked Questions

How is the price of used gold calculated?

Take the net gold weight after removing stones and non-gold parts, convert it to the base purity, and multiply by the shop’s buying rate.

Do jewelers refund the making charge on old gold?

Usually not; used gold is bought on weight and purity, and the making charge paid originally is not returned.

Why is the buying rate for used gold lower than the selling rate?

Because the shop bears the cost of repair or melting, testing, risk and idle capital until resale. The size of that gap is each shop’s policy.

Can I buy used gold without testing its purity?

It isn’t recommended. Even with a hallmark, at least a quick test is needed, and heavier buys deserve a more accurate assay.

Where should purchased used gold go in the books?

In a separate stock group called used gold, with weight and purity, until it is repaired and sold or melted.

To see purchase invoices and melt recording in practice, explore Zaran gold and jewelry accounting software and request a demo.

Further reading

• How to Choose the Best Gold Accounting Software for Your Shop
• How to Calculate Gold Jewelry Price: Making Charge, Profit, VAT
• Gold Wholesale Accounting: Transfers and Weight-Based Settlement

Complete guide: gold and jewelry accounting software