Any Old Gold

OFT probes firms that offer to buy gold by post

Demand for gold is high but sellers risk a raw deal in an unregulated market
Buzz up!

Companies that buy gold from people by post are being questioned by the Office of Fair Trading to find out whether they are breaking the law.

In recent months many companies have sprung up offering to buy gold jewellery and other items in exchange for cash. Some householders have cashed in on the boom, hosting gold parties, where the host buys from guests and receives a percentage of the takings.

Companies offering money for gold have also become more high-profile, recruiting celebrities such as darts commentator Bobby “Dazzler” George, MC Hammer and Anne Diamond to promote their business in print and television adverts.

All this has come on the back of a steep rise in the price of the metal. A report from the World Gold Council last Thursday confirmed that it had risen by 25% during 2009. In December the price of gold peaked above $1,200 and remains about $1,100 an ounce.

Juan Carlos Artigas, investment research manager at the council, said demand for gold was likely to remain strong throughout 2010 “as investors concerned about price stability, the spectre of inflation and the outlook for the US dollar … seek ways to protect their wealth”.

The OFT is asking five companies about their business practices and to explain claims made in their advertising and on their websites.

Its investigation follows complaints about the companies, which it will not name. Among the OFT’s concerns is whether consumers’ rights to reject an offer for their gold and receive it back are being honoured.

Once the OFT receives the information, it will consider what further action, if any, is appropriate, it says.

Juliet Young, of the OFT, says buying gold by post was a relatively new business model, and that while innovation often brings benefits for customers, “We want to check that the market and businesses operating in it are developing in a way that treats customers fairly.”

The move came as Which? Money issued a report advising people to avoid all companies that encourage them to sell their unwanted gold by post, concluding that they offer “shockingly bad value”.

Which? sent three pieces of new gold jewellery to four buyers that advertise on TV, three independent jewellers and three pawnbrokers. The TV gold buyers gave the worst quotes.

CashMyGold, which uses gameshow host Dale Winton to promote its service, offered the lowest prices: £38.57 for the three pieces of jewellery bought for £729.

Another company, Money4Gold, “effectively held a 9ct gold necklace to ransom”, says Which?, telling a researcher a piece bought for £399 was “not gold” and it would cost £10.95 to have it returned. Money4Gold were contacted by the Observer but did not respond to the calls.

Postal Gold increased its offer for all three pieces of the jewellery after the researcher rejected its initial quote, nearly doubling the amount it would pay for two of the items. However, these rates were still far lower than those from jewellers and pawnbrokers.

The research found that on average, the TV gold buyers offered about 6% of the retail price for gold; high street shops paid about 25%.

“The poor value for money that these TV gold buyers are providing is simply shocking,” said Which? chief executive, Peter Vicary-Smith.

“The cash for gold market is unregulated, and this investigation has raised some serious concerns about the fair treatment of consumers. People should be wary of buyers’ adverts as they could almost certainly get more money for their gold elsewhere.”

The OFT is interested in hearing from consumers who have used companies that buy gold using the postal service. Its team can be contacted via the website, at oft.gov.uk/goldpost.