Winnipeg gold buyers make errors in determining karat
I-Team probe finds $400 difference between highest, lowest offers for jewelry
By Leif Larsen, CBC News
Posted: Feb 14, 2013 5:55 AM CST
Last Updated: Feb 14, 2013 6:41 PM CST
A CBC News I-Team investigation has revealed that Winnipeggers selling their gold may be getting less than it's worth.
An I-Team producer visited five Winnipeg scrap gold buyers, asking each to determine the weight and karat of six pieces of gold jewelry. The producer then asked the store to make them an offer.
While all stores weighed the jewelry accurately, in every shop the producer was told at least one piece of 14-karat jewelry was actually a lower karat.
Three of the five stores got the karat wrong for at least two pieces of jewelry. Only one test in 30 overestimated the karat.
CBC News also found a wide variation in the amount of money offered for the jewelry, with prices ranging from $360 to over $760 for all six pieces.
The jewelry was loaned to CBC News by Gerry Gordon, the owner of Gerry's Jewelry Appraisals. The I-Team also independently weighed and analyzed each item's karat.
Variety of methods used
Karat is a measure of the purity of gold, and it determines the value of the item being sold. The higher the karat, the more the jewelry is worth. The difference in price between 10-karat and 14-karat gold can be as high as 40 per cent.
The stores used a variety of methods to determine karat, from scratching the gold on a stone and dissolving the residue with acid, to using electronic testers and even an X-ray fluorescence (XRF) machine that is worth $70,000, according to the owner.
Gatewest Coin assessed five of the six pieces correctly. It under-estimated the karat of one 14-karat ring with an acid test, saying it was actually 10-karat.
Chris Porco, a spokesperson for Gatewest Coin, acknowledged the error and said if his store had actually bought the jewelry, his employee would have verified the acid test with its XRF machine, and the mistake would likely have been caught.
KMG Gold Recycling also estimated five of the six pieces correctly. It under-estimated the karat of one ring with its XRF machine, saying a 14-karat ring was 12-karat.
Mike Gupton, president of KMG, acknowledged the error but said he still trusts his machine.
"The [acid test] is 3,000 years old. XRF is state-of-the-art. It is the top of the top for determining purity," he said.
A & C Pawn, Winnipeg Gold Buyer and Pawnderosa Trading each made more than one error when it came to determining the jewelry's karat. They also used electronic testers.
Mike DeSousa of A & C Pawn said purity can be different across a single piece of jewelry, which is why they normally test in several places, but errors can still happen.
"The machine is most definitely accurate, but it is harder to follow," said DeSousa.
Winnipeg Gold Buyer declined to comment. Pawnderosa Trading said they made the producer an offer based on what they thought the gold was worth.
Some testers subject to error
The fact that gold buyers using electronic testers appear to have made the most errors didn't surprise Keith Perrin of GoldSmart in Toronto.
Perrin said some electronic testers "are subject to a lot of error, while giving the impression they're very accurate." He said they respond badly to things like plating on the jewelry and can give inaccurate readings if the machine is not in good repair.
Perrin also said the results of the electronic testers are not clear.
"There is a level of interpretation in getting from the number the machine produces to some conclusion about what the karat is," he said.
Because of the interpretation involved, the customer is also kept in the dark about the machine's results — something Perrin said is not ideal for a transparent transaction.
Perrin said the XRF machine is the most accurate, but it can still make errors.
"The XRF is an extremely reliable piece of equipment [unless] the person who used the XRF didn't prep the piece of jewelry properly," he said.
The acid test, in Perrin's opinion, is the most reliable, and it's the one he uses at GoldSmart.
"There's a saying in the precious metals business: 'The acid never lies,'" he said.
In all cases, though, Perrin stressed the test is only as good as the operator using it.
At KMG, Gupton said he encourages people who are selling gold to shop around and ask as many questions as needed to be comfortable with the transaction.
Jewellers Vigilance Canada, a self-described "watchdog" for the jewelry industry, keeps a record of complaints against jewellers and gold buyers. It encourages anyone with concerns about a jewelry transaction to contact them.
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