Millions of Californians are flocking to gold buying establishments every day in the hopes of making quick cash for their scrap gold and unused jewelry. Hopeful sellers visit “cash for gold” businesses, attend gold buying events in hotels, and even host gold buying parties in their own homes.
Meanwhile, a growing number of unregulated cash for gold businesses are taking in millions of dollars every year on potentially illegal gold transactions, often circumventing state, local and federal law and evading law enforcement, according to the California Pawnbrokers Association.
According to Diane Taylor, President of the, rogue gold buyers should be a serious concern for Californians. “These gold buying businesses often operate without required secondhand dealers licenses, necessary certifications, and neglect to follow simple procedures required by law such as requesting sellers’ photo identification.” Law enforcement officials, in the US and abroad, believe these unregulated gold transactions are leading to rise in violent crime.
In 2010, police in Pennsylvania and New York reported a rising trend in cash for gold related theft. In the Virgin Islands and the Caribbean, police cited that unregulated cash for gold businesses were responsible for a rise in violent crime. And in an official statement made last October, British Labour MP Katy Clark called for tighter regulations for gold buyers “in order to bring about a reduction in resulting crime.”
Regulated and certified pawnbrokers and secondhand dealers are required to comply with anti-fencing law and regulation, coordinating with law enforcement to track all processed items. These precautions greatly discourage illegal selling, fencing and illegal activity. Rogue companies that buy gold illegally may take in stolen items, which can be scrapped almost immediately, leaving law enforcement officials no recourse on claims of stolen goods or the ability to trace the item to its seller. The potential for criminals to sell stolen items to unregulated gold buyers is substantial.
California state law requires any businesses involved in purchasing precious metals to obtain a second hand dealers license. Such businesses are also obligated to conduct transactions only on their permanent business premises, hold the scrap gold or jewelry for a 30 day period, request official identification from the seller, and use scales that are tested and certified by the California Department of Food and Agriculture’s County Office of Weights and Measures.
Californians who sell gold to businesses that fail to comply with regulations run the risk of being mislead about the value of their items. “Representatives of the company may tamper with scales,” warned Diane Taylor, “resulting in a lower weight reading. When just a few grams can mean several hundreds of dollars, having an accurate scale is critical. Unless the Office of Weights and Measures tests and certifies the scale, there’s simply no way to tell. At that point, it’s simply a matter of trust.”
The Better Business Bureau does a good job of tracking complaints. You can search by a web domain or business name, as many of these businesses appear under multiple names.
“The best way to sell your gold is to find a licensed and regulated business, like a pawn shop, secondhand dealer or a jewelry store,” advised Diane Taylor. “Pawn shops are accountable for their business practices and are regulated on a federal, state, and local level. Pawnbrokers are experts in gemology and metallurgy, they can test your gold on the spot and conduct a safe face-to-face transaction. They are permanent members of their communities and want to have a positive ongoing relationship with customers.”
“Government officials are aware of the proliferation of illegal gold buying establishments”, says Sam Shocket, president of King’s Jewelry & Loan Co. in Los Angeles. He added, “Unfortunately, it seems they simply don’t have the resources or funding to increase oversight and enforcement.”
With millions of dollars of potential profits at stake and recent record high prices for gold, Mr. Shockett believes California could generate a substantial amount of revenue from businesses obtaining the proper licensure to purchase precious metals as well as increased tax revenue, all actions that his brick and mortar business complies with. He also believes that enforcement of the law would help cut back on crime.