The great fools gold rush: Ads urging you to sell old jewellery for cash may not be as glittering as they seem



Less bling: Women are rushing to sell their old jewellery at gold parties but could be short changed

A suburban street in the heart of Essex and a dozen women are gearing themselves up for a night of fun. The rosé wine is flowing, the nibbles are on the table - Tesco's Chinese chicken wings, Pringles and dips - and the air is heavy with perfume.



But not all is as might be imagined. Sure, the guests are suitably dressed up, but, given the geographical location, they're surprisingly light on the bling.



And the reason soon becomes apparent. Instead of wearing their jewellery, the women attending this soiree are actually here to flog it.



Forget Tupperware parties, this is the frontline of a very modern gold rush. In the corner of the room sits Loellie, an attractive twentysomething woman armed with impossibly high heels and a set of minutely accurate electronic weighing scales.

A guest called Julie approaches and hands over a small bag containing a gold charm bracelet, a few rings and some odd earrings.



'I lost most of my significant jewellery in a house burglary a few years back,' she says. 'These are just odd pieces I have that I no longer wear.'



Loellie examines the items with a magnifying glass, weighs them and then divides them into different piles according to purity: nine, 18 and 20-carat. She then offers to buy the lot for £221.



Julie is delighted and accepts a cheque there and then. 'It's fantastic,' she says. 'I haven't worn any of this stuff for years, and now I've got a cheque for more than £200. I am going to put it towards decorating the front room in time for Christmas.'



Julie is not alone. Up and down Britain similar parties are being held every night of the week. The reason is simple. Bullion prices have risen to an all-time high just when the man and woman on the street is more desperate than ever for cash.



Earlier this week an ounce of gold touched $1,150 (£685). That is an 11 per cent increase in the past three weeks and 30 per cent in the year.



Hardly surprising, then, that it is estimated that 35 tonnes of bullion will be produced from scrap gold in the UK this year. At current prices, that is worth in the region of £700 million.



That's an awful lot of unwanted earrings to hand over at an awful lot of parties - but, of course, these gatherings are just the tip of the iceberg.



Pick up a newspaper, switch on the TV or log on to the internet, and it is almost impossible to miss the advertisements offering seemingly irresistible opportunities for people to cash in their unwanted gold.

There are growing concerns that Britons risk being ripped off to the tune of £500m as they lose their heads in the dash for cash

'It's time to take that gold and get it sold,' urges one firm. Others encourage people to scrap not only their unwanted trinkets but gold teeth and bridgework, too.



And, today, it's not even necessary to leave the comfort of your front room to cash in.



Pop the valuables in an envelope and these firms promise to do the rest, sending you a cheque by return of post.



It's a far cry from the back-street pawnshop or jewellers where such goods might previously have been offloaded - and not everyone's convinced the new deals on offer are quite as good they sound.



Indeed, there are growing concerns that Britons risk being ripped off to the tune of £500 million as they lose their heads in the dash for cash.

While no one is expecting to be paid the full market price for their scrap gold, some companies are offering as little as 9 per cent of that figure. Equally worrying are the problems people are having when dealing with some of the supposedly 'hassle-free' pop-it-in-the-post companies.



The Mail can reveal that across the country trading standards officers are investigating a legion of complaints.



For sale: But you might get a lot less for your gold than it's actually worth

'Wherever you look on the television, in the local paper or walking down the High Street, it is clear that there is money to be made out of gold,' says one officer. 'We understand exactly why people want to sell, but would just urge them to be extremely cautious.'



In other words, it is a case of: seller beware. But, as they once found in the Wild West, when gold is involved it does not take much to turn people into fools.



It's a good few miles from Romford to the Swiss canton of Ticino, but it's a journey that Julie's jewellery might be making in a week or two.



The world's gold processing capital, in the past few months its furnaces have been working around the clock to smelt the gold rings, chains and bracelets pouring across the Continent.



There has been a surge in demand because, as generally happens in times of economic crisis, gold bullion is seen as a far safer bet than stocks, shares and currencies.



'We'll get hundreds of kilos of scrap jewellery from Europe this year and I've never seen that amount before,' says Erhard Oberli, chief executive of Argor- Heraeus, one of three gold refineries that dominate the market.

While some of the jewellery arrives intact and has to be taken apart, usually it has already been melted into rough bars by merchants before being transported to the plant.



The smelting process is labour intensive and precise - gold dust is even recovered from the plant's door mats and from the annual incineration of staff overalls. As Mr Oberli explains: 'Nothing must be wasted.'



They are words that the British public would do well to heed before flogging off their gold without first carrying out some basic research. For companies promising to deliver 'the best prices' may, in fact, be selling them seriously short.



Last month, trading standards officers in Hertfordshire carried out an investigation into a firm which has been advertising on national television.



The company, which cannot be named due to possible pending legal action, promises to deliver '100 per cent satisfaction or your gold back'. It struggled on both counts.

As happens with many of these companies, the items to be sold are sent through the mail. The potential seller contacts the firm, which sends them a package into which the goods are placed before then being posted by Royal Mail Special Delivery.

Having received the gold, the company weighs it and assesses its purity, measured in carats. Based on that a cheque is then sent back to the vendor for the sum the firm is offering.

To test how this works in practice, the trading standards team sent off a gold bracelet that had been valued by a number of jewellers at between £40 and £60.



But the company in question valued it at much less - sending a cheque for just £5.31.

Again, as is the case with many of these companies, the vendor is supposed to be able to reject the offer and request the gold back. But as tradings standards discovered, that is not always as easy it sounds.



'There was a seven-day period in which they were able to send the cheque back,' said a spokeswoman. 'The trouble was the officer simply could not find an address to send it back to.



'She made lots of attempts to get through to the company by phone and by email, and when she did eventually manage to speak to someone and ask for her bracelet back, she was told it was too late, that the seven-day return period had passed and that her bracelet had been melted down.'



It was at this stage that an increased offer of £30.62 was made - a 600 per cent increase on the original, but still less far less than the bracelet was worth.

Growing value: An ounce of gold touched $1,150 (£685) this week

The officer also discovered that the company was interested only in the gold; any other jewels contained in an item of jewellery (diamonds, for instance) would not have been valued and would be returned only if the person paid for the postage.



'The problem with any company of this nature is that once you send your jewellery off to them, you lose control over it,' said the trading standards spokeswoman. 'There is no way of knowing before you part with it whether or not you are dealing with a legitimate firm.'



The problem with many of these companies is that they don't publish the rates that they actually pay for gold.

The Mail contacted one, CashMyGold, and asked it what percentage of the market price it would pay for gold. 'We choose not to give out the price we pay,' we were told. 'Just send the item to us and we will value it.'



But surely it must base its offer on a set percentage of the current market price?



'I don't know how much it is,' said the representative. 'I have no idea what percentage we pay.'



A similar response was elicited from market leader Cash4Gold, which launched in the UK in the summer and is aiming for sales of £50 million a year.



The company, which is well-established in America, has previously revealed that it pays between '20 per cent and 80 per cent' of the market price - depending on quantity and quality.



Without knowing precise rates it is impossible for a seller to even roughly estimate what they can expect to receive when sending off a piece of jewellery (even if they knew its exact weight and carat).



Lawrence Chard has been running a coin and bullion dealers in Blackpool since 1964, and warns that the public are in real danger of being sold short.



'I weighed the gold before I sent, did some research and estimated I would get about £400 - I was shocked when a cheque arrived for just £89'

'In 1980 gold prices peaked at $850, and we saw then the same thing happening,' he says. 'People are setting up as dealers and not paying very good prices, and, in some cases, totally ripping people off.'



With nine-carat gold worth about £8-a-gram as scrap, his company is currently offering in the region of £6.50 a gram, the price fluctuating by 50p in each direction according to quantity and quality.



'I am aware that people are paying £4 a gram or less,' says Mr Chard. 'If that is the case, then nationally that could equate to a £500 million a year rip-off.'



Of course, it is only fair to point out that these companies are entitled to offer whatever price they want. It is up to the seller to decide if he or she wants to take it or leave it.



Aside from the fact that most people don't have a clue what their gold is really worth, the difficulty comes, as Hertfordshire Trading Standards found out, because the seller isn't always able to walk away from a bad deal.



It is something that 40-year-old Maxine Medhurst is only too well aware of. The married mother of three from Kent, whose husband runs his own cleaning company, contacted a company called Money4Gold on October 14 after she saw an advert on TV.



She sent them gold in the form of three rings, several bracelets and a number of old neck chains with a view to raising spending money for a trip to New York with her husband in the New Year.



'They told me they would send me a cheque within 24 hours of receiving and valuing the gold,' she said. 'They said if I was not happy with the price, I could send back the cheque and they would promptly return the gold.



'I weighed the gold before I sent it off, did some research on the internet and estimated I would get about £400.'



But when the cheque arrived she was shocked to see that it was for just £89. The next day - October 21 - she sent it back by recorded delivery, telling the company in the accompanying letter that she was not happy with the amount and wanted her gold returned.



'I didn't hear from them, so a week later I phoned,' she said. 'Someone in customer services said they would increase their offer and said they would send me a cheque for £179.52. I refused because I thought if that's what they're offering me now, so quickly over the phone, then how much is it really worth?'



'People have sent off their gold and then found out it had already been melted before they had confirmed they wanted the money offered'

Mrs Medhust was told they would return the jewellery within ten to 15 days. She is still waiting for it to arrive.



'On November 12, I sent them a letter demanding the return of my gold within seven days or I would take legal action against them,' she says.



'Since then I have called them every day, but I just keep getting fobbed off with the message that my gold will be with me shortly, and I still haven't had it back.



'I've read stories on internet forums about people who have sent off their gold and then found out it has already been melted down, even when they have not been happy with the price offered.'



Contacted by the Mail, the company's UK managing director Noyan Nihat promised to look into Mrs Medhurst's case. He said that the items should have been returned within two to three days of her refusing the offer.



Back at the 'gold party' in Essex, the assembled guests say they are happy with what they are being offered, which roughly equates to £5.50 for a gram of nine-carat gold.

The soiree has been organised through a company called Ounces2Pounds, and the host for the night is Carmen Joseph, a 43-year-old administrator for a logistics company.



She decided to hold the party after making £1,300 when she attended a similar event at a friend's house.



'I had a small trinket box, and every time I broke something I threw it in there,' she explains. 'That box alone got me £400. Then I had a gold bracelet that my ex bought me that had snapped. That made me another £400.



'I didn't even know if it was real because it was a present. When the man was weighing it, I thought I'd better not say anything in case I lost myself some money. But he ended up saying it was really good quality 22-carat.



I had a matching necklace that I couldn't find. So I went around the house like a woman possessed, and when I found it I decided I would host my own party.'



In return for organising the party and inviting her friends, Carmen receives a 10 per cent commission, which on Thursday night meant a cheque for £500.



Of course, it might be that the party goers could have earned more by holding on to their gold for a few more months.



Experts predict prices may rise further still in 2010. Equally, they could go in the opposite direction. And someone who needs no reminding of the volatility of the gold market is Gordon Brown.



In 1999, when Chancellor of the Exchequer, he sold off 395 tonnes of the stuff from Britain's national reserves at an average price of $275 an ounce.



That's about one-quarter of what he would have got had he sold it today. And it takes an awful lot of rosé to dull the pain of a deal like that.



