Purchasing gold? Follow the rules

The price of gold reached an all-time high this past March, topping out at $1,030 for an ounce of 24-karat gold, compared to $578 two years ago or $300 in 1998. These high prices, combined with an economic slowdown, have some jewelers starting gold buy-back programs to generate revenue and foot traffic.

In Michigan, however, such a program is not simple or straightforward. A rigorous state law, known as the Michigan Precious Metal and Gem Dealer Act (MCL 445.481-492), regulates the purchase of precious metals and gems.

The law details how these transactions must be handled and requires much paperwork and follow-up after the transactions. In some areas, such as Lansing and Detroit, local laws add greater regulation.

These regulations are designed to help law enforcement track down stolen goods and make it harder for thieves to fence the items.

First, a business must be registered with the state as a dealer of precious metals and gems, which typically begins by contacting the local police or sheriff’s department. By registering as a dealer, a business agrees to abide by the regulations and gives consent to inspections by local police, sheriff’s departments or county prosecuting attorney’s offices.

Once a business becomes a precious metals dealer, it must establish a process of recording transactions and keeping those records in accordance with legal requirements.

Those interested in becoming a dealer will want to review the law in detail, but the following overview may help a business evaluate what’s involved.

For each transaction, dealers are required to complete a record of transaction, with copies for the seller, the dealer and the local police. In addition, the piece must be held for nine days.

Along with basic information, such as date, name, address, the price paid and the form of payment, the record of transaction must include a general description of the item(s) received, including all letters and marks inscribed on jewelry.

The dealer must also obtain the seller’s driver’s license number or state ID card number and a thumbprint, which must be made available to police in the event of an investigation.

Dealers must then send the police agency’s copy within 48 hours of the transaction. After one year, dealers’ copies must be destroyed.

For those who are prepared to comply with these laws, business can be brisk and profitable. Liberty Coin Service in Lansing, which has bought gold from customers for many years, has seen an incredible surge in business.

“We have filed more records of transactions for gold sales in the first four months of 2008 than in the previous three years combined,” said owner Patrick Heller. “At the peak of sales, some customers have waited in line up to 90 minutes to sell their gold.”

Heller advises those who buy gold or are considering it to read the entire state law carefully. Also, discuss the regulations with your local police.

Heller says that not all police departments are completely familiar with the laws. “In some cases the dealer may need to educate the local police about the state law.”

As for setting the price you can pay, consider your cost of purchasing it as well as what you will get for it from the scrap metal buyer you use.

Many jewelers offer a higher price for gold when it is put toward another purchase at the store. Orin Jewelers in Garden City and Northville gives customers 50 percent more for their gold when it is put toward a purchase or on a gift card.

“It’s an excellent way to help customers afford a nicer piece and to get new customers who are pleased to get even more value for that gold,” said owner Orin Mazzoni.

“This whole phenomenon is also very good for the customer’s morale. They often come in with some old pieces, hoping to get maybe $100 for it, and are pleasantly surprised to find out it’s worth maybe three times that. People need good news like that these days.”

For people interested in selling their personal gold jewelry, the Attorney General’s office has issued a Consumer Alert advising people to deal only with reputable dealers, shop around for the best price, and have the piece appraised to determine the quality of the gold (14-, 18- or 24-karat). Jewelers and precious metal dealers usually have on-site labs that test the quality of the gold.

The Jewelers Vigilance Committee, which provides education and self-regulation to the jewelry industry, offers consumers tips for selling gold on its website at www.jvclegal.org.