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£672 Melt vs £242 in Your Hand: Why the “Live Gold Price” Isn't What You Get
A reader emailed me recently, baffled and a little annoyed. He'd weighed his old gold, checked the live gold price online, and worked out his scrap was worth £672. The dealer offered him £242. Same gold, same day, and a gap of £430. Was he being ripped off?
Not necessarily. What he'd bumped into is the single most misunderstood thing about selling gold: the "live gold price" you see on the news is not, and never was, the amount anyone will hand you. To understand your real payout, you need to separate three different numbers that get lazily lumped together.
Number one: the spot price
The spot price is the global wholesale benchmark for one troy ounce of pure, 24-carat gold. It's the figure quoted on financial news, set by enormous international markets, and it moves every few seconds. It's real and it matters — but it comes with two big caveats that make it almost useless as a guide to your payout.
First, it's for pure gold. Your jewellery almost certainly isn't pure; 9ct gold is only 37.5% gold by weight. Second, it's a wholesale price for large quantities traded between institutions, not a retail price for the ring in your hand. Nobody buying a few grams of scrap pays the spot price, in the same way no one buys a single banana at the wholesale market rate.
Number two: the melt value
Melt value is where things get personal. It takes the spot price and scales it down to your specific item — its actual weight and its actual purity. The maths is straightforward:
Melt value = (spot price ÷ 31.1035) × fineness × weight in grams
That 31.1035 converts a troy ounce into grams, and the fineness is the decimal purity — 0.375 for 9ct, 0.750 for 18ct, 0.9167 for 22ct. So a 10g 9ct chain isn't worth ten grams of pure gold; it's worth ten grams at 37.5% purity. This is the calculation our gold calculator runs for you automatically once you enter the weight and carat, so you don't have to reach for a calculator yourself.
Melt value is a fair, honest number. It's what the pure gold content is genuinely worth at today's market rate. But — and this is the crux — it's still not what lands in your pocket.
Number three: the realistic payout
The realistic payout is melt value minus the dealer's cut. This is the number that actually matters, and it's the one every price ticker ignores. Dealers aren't charities — they refine the metal, carry the risk of price swings, cover overheads, and need a profit. That margin is the gap between melt value and your payout.
How big is the gap? It depends enormously on who you sell to:
| Type of buyer | Typical share of melt you receive |
|---|---|
| High-street pawnbroker / cash-for-gold shop | Around 50–70% |
| Reputable online mail-in refiner | Around 85–90% |
| Specialist bullion dealer | 90%+ |
| Legal-tender coins (Sovereigns, Britannias) | Near spot value |
Now the reader's £672-versus-£242 mystery makes sense. He'd calculated the melt value of his scrap and then walked into a high-street shop paying at the very bottom of the range — barely 36% of melt. That's a poor offer even by cash-for-gold standards, and a good online refiner would likely have paid him well over £550 for the same gold. His problem wasn't the gold price; it was where he took it. Our breakdown of what dealers actually pay digs into how to spot a fair offer from a stingy one.
Why the gap is huge on scrap but tiny on coins
Here's the pattern worth burning into memory. The margin dealers take is largest on scrap and smallest on recognised bullion.
Scrap jewellery has to be tested, sorted by carat, melted, refined and assayed before it can be resold. Every step costs money and time, so the buyer builds a fat margin into the offer. A mixed bag of broken chains is the worst-case scenario for payout percentage.
A Gold Sovereign or Britannia, by contrast, needs none of that. Its weight and purity are known and trusted the world over, it can be resold instantly to another buyer, and it carries no refining cost. That's why bullion coins trade at close to spot — the dealer barely has to do anything. If you have a choice, this is why coins hold value so much better than scrap of the same weight.
Putting it to work: the payout slider
Understanding the three numbers is one thing; using them is another. The calculator gives you a payout slider precisely so you can see reality, not fantasy. Here's how I'd use it:
- Enter your item's weight and carat to get the honest melt value.
- Drag the payout slider to match the kind of buyer you're considering — pull it down to around 60% for a high-street shop, or up toward 90% for an online specialist.
- Read off the realistic payout. That's your ballpark for what to actually expect in hand.
- When a real offer comes in, compare it against that figure. If it's miles below even the pawnbroker line, walk away.
None of these figures are offers, and the price moves daily — you can see just how much it swings over time in our gold price history. But once you hold the three numbers apart in your head — spot as the wholesale benchmark, melt as your item's honest raw worth, payout as what actually lands in your account — you stop being surprised and start being in control. The £430 gap that shocked our reader wasn't a scam. It was the difference between reading a headline number and understanding it. Get the melt value first, decide what payout percentage you'll accept, and let the offers come to you.
All figures are estimates of melt value, never offers. Not financial or tax advice.