How Dealers Calculate a Gold Buyback Offer
The offer you get is not a mystery. It is a formula — and once you can run it yourself, you can tell a fair price from a bad one in seconds.
When you hand your gold across the counter, the buyer runs through a short, predictable sequence to arrive at a number. Every legitimate gold buyer on earth uses some version of the same steps. Learn the steps and you stop being at the mercy of the offer: you can reproduce the calculation in your head, spot where a buyer is shaving value, and know when to accept or walk. This guide lays out the process and works three real examples.
Step 1: Determine purity
The buyer first establishes the karat. They read the hallmark, then usually confirm it with an acid test or an XRF scanner. This matters because the payout is based on the pure gold content, not the total weight. A 14K piece is only 58.3% gold; a 22K piece is 91.7%. If a buyer claims your stamped 18K piece "tested lower," ask to see the XRF reading — an unverified downgrade is the most common way of quietly cutting an offer.
Step 2: Weigh the gold
Next the piece goes on a calibrated scale, ideally in front of you. Note the unit: grams or pennyweights. If several pieces of different karat are involved, they should be weighed and priced separately by karat, because mixing a 22K bangle with a 10K chain and paying the whole lot at 10K throws away real money.
Step 3: Calculate the melt value
Now the buyer computes the pure gold content and multiplies by the current price per gram:
Melt value = Weight × Purity × (Spot price ÷ 31.1035)
This is exactly what our gold calculator does. The melt value is the true market value of the metal — the ceiling of what your gold is worth as raw material. No buyer pays the full melt value, because they need to make money and cover refining, but melt value is the reference point everything else is measured against.
Step 4: Apply the payout percentage
The buyer multiplies the melt value by their payout percentage — the share of melt they are willing to pay. This is the single number that separates a fair buyer from a predatory one:
- 90–97% — refiners and the best bulk buyers, usually for larger lots.
- 80–90% — strong offer from a specialty gold buyer.
- 70–80% — fair, typical of a reputable pawn shop or jeweler.
- 50–65% — weak; get another quote.
- Below 50% — a rip-off, common with mail-in buyers.
The payout percentage exists because the buyer must refine the gold (which has a cost and a small metal loss), cover overhead, and earn a margin. A reasonable percentage is legitimate. An extreme discount is not.
Step 5: Deduct any fees
Some buyers apply an explicit refining fee, assay fee, or lot fee on top of the payout percentage. Others fold everything into the percentage. Neither is wrong, but you should know which is happening, because a "90% payout" with a large separate refining fee can net less than an honest "82% all-in." Always ask for the final figure after every deduction.
The whole formula: Offer = Weight × Purity × (Spot ÷ 31.1035) × Payout% − Fees. Calculate the melt value at home first; then the only thing you are really negotiating at the counter is the payout percentage.
Worked example 1: a single 14K chain
A 25-gram 14K chain, spot gold $4,686/oz.
- Price per gram (24K): $4,686 ÷ 31.1035 = $150.66
- 14K value per gram: $150.66 × 0.5833 = $87.90
- Melt value: 25 × $87.90 = $2,197
- At 80% payout: $1,758
- At 55% payout: $1,209
Same chain, same day — a $549 difference purely from the payout percentage. That gap is why shopping two or three buyers is worth the afternoon.
Worked example 2: a mixed lot
A 10-gram 22K bangle plus a 12-gram 10K chain, spot $4,686.
- 22K bangle: 10 × ($150.66 × 0.9167) = 10 × $138.13 = $1,381 melt
- 10K chain: 12 × ($150.66 × 0.4167) = 12 × $62.78 = $753 melt
- Total melt: $2,134
- At 78% payout: $1,665
If a buyer weighed both together and paid the lot at 10K purity, the melt would collapse to about $1,381 before the percentage — costing you several hundred dollars. Insist on per-karat weighing.
Worked example 3: bullion coin
A 1 oz Krugerrand contains exactly one troy ounce of pure gold. At spot $4,686 its melt value is $4,686. A reputable dealer pays close to melt for recognized bullion — often 96–100%, sometimes a small premium — because there is no refining needed. So expect around $4,500–$4,700. If someone offers you $3,800 for a Krugerrand "because gold is scrap," walk out. Coins are not scrap.
The takeaway
Every offer is melt value times a payout percentage, minus fees. Compute the melt value before you go, get quotes from more than one buyer, and treat the payout percentage as the number you are negotiating. Knowledge of the formula is the entire game.