Know your carats, dodge crooks, cash in on gold safely

As economic pressures continue to squeeze consumers, a dense market for “cash for gold” buyers – from reputable national chains to unregulated, fly-by-night operators – has flourished. The stakes are high: navigating this opaque market can mean the difference between getting a fair price for a family asset and being short-changed.

Global price, local supply, and consumer motivation

Gold recycling, primarily from old jewellery, is a significant component of global supply, typically accounting for about 1,400 tonnes annually. This secondary market swells during price rallies and periods of financial distress. As John Reade, senior market strategist at the World Gold Council (WGC), explains, gold price cycles are the primary motivators: a rapidly rising price pushes gold into the news, prompting people to sell. Reade notes that, for consumers, this selling is often linked to urgent financial necessity. “Consumer distress is a part of the increased motivation to sell gold back as well,” he says.

While global recycling supply has been muted despite record US dollar prices – partly because many anticipate prices will climb higher – local economic conditions and currency weakness in emerging markets like South Africa also play a crucial role.

Reade cites India as an example, where people increasingly use gold jewellery as collateral for loans instead of selling it outright, securing liquidity when traditional finance is inaccessible. This underscores gold’s role as a strategic, liquid asset in times of need.

The WGC’s Gold Demand Trends Q3 2025 report confirms that high prices simultaneously depress new gold consumption and stimulate liquidation. It notes that global jewellery demand fell sharply this year, with a 19% year-on-year decline in the third quarter.

Local market mechanics: the reputable buyer

To establish a baseline for legitimate trade, national chains like Cash Converters provide a model of strict, transparent processes anchored in regulatory compliance.

First, the item’s purity (9ct, 18ct, etc) is identified by checking the stamp mark. This is followed by an acid test to verify quality and confirm the piece is not plated. A tiny scratch is made on a testing stone, which is then exposed to a specific acid solution; the reaction indicates whether the stated purity is accurate. The entire process takes place in front of the customer.

Read more: Gold price surge can’t heat up SA outlook after US cold shoulder

“Transparency is very, very important in this process,” says Kobie Koekemoer, national operations manager at Cash Converters. The final calculation is based on the verified carat, measured weight and the live spot price of gold for that day.

Nicole Thomson, group franchise sales and marketing director at Cash Converters, emphasises that the process also creates a safety barrier: “Our process and our system make it difficult for criminals to sell to us because they don’t want their details on the system.”

Reputable buyers follow Know Your Customer principles: they verify identification, scan and store the customer’s details and often photograph both seller and item. This verification process deters criminals, prevents the circulation of stolen goods and maintains the chain of ownership required by refiners.

The dodgy buyer’s playbook: where the money is lost

Unregistered, unscrupulous gold buyers dismantle these transparent processes, creating an environment where consumers lose value and unknowingly fuel illicit markets.

The Financial Intelligence Centre (FIC) identifies dealers in precious metals as a “high-risk, cash-intensive sector”, noting that gold’s liquidity and ease of cross-border transport make it particularly vulnerable to smuggling. Its 2022-2023 Sector Risk Assessment: Dealers in Precious Metals and Stones highlights how South Africa’s strategic location and established gold value chain attract regional smuggling networks, linking local unregistered buyers to broader illicit supply routes.

These illicit markets thrive because they offer immediate, untaxed cash, appealing directly to consumers in the “consumer distress” bracket noted by the WGC. By circumventing compliance – offering anonymity and fast cash – unregulated buyers deliberately target sellers who lack documentation or are desperate enough to accept a low price.

Lorna Lloyd, CEO of the Jewellery Council of South Africa, warns that consumers should be cautious of buyers who are not registered under the Second-Hand Goods Act.

Typical tactics used to underpay consumers

Zero transparency: Buyers refuse to test the item, test it out of sight, or offer no explanation of the price;
High-pressure tactics: Be wary of “instant cash” offers or high-pressure sales tactics without providing necessary documentation;
Scale manipulation: Scales are crooked, uncalibrated, or the item is weighed quickly without the customer seeing the reading;
Purity fraud: Offering a 9ct price for an 18ct item or using inaccurate testing acids to understate purity;
Avoiding documentation: Refusing ID or proof of address signals deliberate avoidance of FIC compliance obligations designed to prevent stolen-goods circulation and money laundering; and
Tax-dodging schemes: Some dealers falsely declare gold as “second-hand jewellery” to improperly claim VAT refunds from SARS, often relying on disguised walk-in suppliers.

Lloyd notes that many of these risks can be mitigated simply by knowing what a reputable, compliant buyer should look like:

“Trust and transparency are the foundation of a healthy resale market for gold. Our members follow strict ethical standards and operate openly with consumers. Sellers should always verify registration, request valuation documentation and be wary of high-pressure or opaque offers. The JCSA continues to educate the public and support ethical practices across the industry.”

Your practical checklist

Know your asset: Weigh your item and determine its carat (stamped on the piece). Use a simple online calculator to find intrinsic value (weight × purity × current spot price). Expect a discount but compare it against intrinsic value.

Example: This is how you would calculate the intrinsic value of an 18ct gold pendant weighing 3g.
Step 1: Determine the purity. 18ct gold is 75% pure gold.
Step 2: Calculate the pure-gold content
3 g × 0.75 = 2.25 grams of pure gold
Step 3: Convert grams to troy ounces
Gold is priced per troy ounce.
1 troy ounce = 31.1035 g2.25 g ÷ 31.1035 = 0.0723 oz
Step 4: Multiply by the gold spot price
Example assumption: Gold spot price = R1,400 per gram
(or ± R43,500 per troy ounce). Intrinsic value = 2.25 g × R1,400
= R3,150

Documentation check: A reputable buyer should provide a document or receipt showing the weight, purity and price calculation;
Demand transparency: Ensure all testing and weighing takes place in front of you on a calibrated scale;
Verify compliance: Legitimate high-value goods dealers must be registered with the FIC and the Second-Hand Goods Act. They will ask for ID and proof of address. Avoid buyers who refuse verification;
Shop around: Prices vary significantly, sometimes by hundreds of rands per gram. Consult multiple established businesses in secure, retail environments; and
Seek accreditation: Look for buyers who are members of industry bodies such as the Jewellery Council of South Africa (JCSA). JCSA membership signals adherence to a code of ethics and gives consumers recourse through its mediation and arbitration services for disputes. Verify membership by looking for Jewellery Council stickers or decals in-store, or search accredited members online here.

The gold-buying market is a “buyer knows best” environment. You are unlikely to receive retail prices, but armed with knowledge and insisting on transparency, you can secure a fair deal and separate legitimate transactions from illicit ones. DM