Why Gold Shops Charge 2% Of Value during Buybacks?

In Egypt, gold jewelry shops discount 2% of the price of gold when buying back from citizens for several reasons, mainly earning a profit, protecting themselves from sharp price fluctuations, and exposure of buying fake items..

George Michel, head of the Gold Traders Syndicate said that citizens tend to buy gold for savings or investment purposes, because it is one of the best savings assets, yet, the resale loss drives them away from it.

Michel added that gold prices are linked to global prices, and therefore vary throughout the day, which prompts traders to deduct a usual percentage of about 2%, to face sudden fluctuations that may expose traders to losses.

He stressed the need for citizens not to respond to dealers that have discount rates greater than usual, as some dealers discount a percentage ranging between 4-10%, which represents an infringement on the rights of customers.

He pointed out that the 2% cut is also a protection factor against theft, as some gold jewelry circulating in the markets may be stamped with higher karat hallmark.

In some cases, fraudsters mark 18 karat gold with a 21 karat hallmark, outside the Assay and Weights Administration, and in other cases items may be stuffed with copper wire.

He added that part of this percentage stands as an earning for gold dealers, especially with the difference between the selling price and the purchase price when dealing between the retailer and the wholesaler, which drives shop owners to make a small profit.

Contributed by: Taarek Refaat