Fast Money: With Gold Prices Dropping, Here's How to Sell Your Jewelry for Top Dollar

For years, gold prices have been breaking records, as investors have eagerly snatched up the yellow metal to hedge against inflation. But on Wednesday, prices dipped as Fed Chairman Ben Bernanke testified that the economy may be recovering -- and investors may not want to park their money in precious metals any longer.

Even at a few hundred dollars off 2011's historic peak, gold prices are still high. But with Bernanke's announcement suggesting that there are more lucrative areas for investment, it's anyone's guess how long it will be before the gold bubble bursts. So if you're hoping to use the recessionary gold rush as an opportunity to get rid of some of your old jewelry, you may be running out of time.

Not surprisingly, as people have scurried to sell their gold over the past few years, numerous companies (and even countries) have tried to cash in. Unfortunately, not all gold mongers have a great reputation -- and some of the most convenient may also be the least scrupulous. So before you rush to sell your family heirlooms, here are a few things you need to know.

How Gold Sales Work

When selling your gold, the first thing to consider is the difference between its retail price and its melt value. Retail price is the cost of the bauble if you were purchasing it in a store; in all likelihood, you will only get offered a fraction of this amount.

Melt value, sometimes called "scrap value," is the commoditized value of the gold itself. If you have an heirloom Rolex, its melt value is probably far less than the retail price; not so for Aunt Mildred's horrendously tacky ring that you dug out from bottom of your jewelry box.

Gold dealers measure scrap gold, like Aunt Millie's ring, in pennyweights. Each pennyweight is 1.55 grams, and a reputable dealer will be able to tell you how much they will pay for a pennyweight of 10k, 12k, 14k, 18k or 24k gold. Using a scale and calculator -- or this handy iPhone app -- you could easily figure out how much the dealer should be paying you. Of course, if Millie's ring is attractive, the work of a famous designer, or has some other qualifying factor, your gold dealer may be willing to offer a fair bit more than the melt value.

Cash 4 Gold

Despite going bankrupt last year, Cash4Gold still seems to be doing business on the Internet. One of the biggest companies to cash in on the new gold rush, its key selling point is convenience: all you have to do is call the Florida-based company or go to their website, request a "Refiner's Return Pack," put your gold items inside, and drop it in the mail. Cash 4 Gold then appraises your jewelry and sends you a check. Unlike jewelry stores or pawn shops, you don't have to do research, make arrangements on the phone, or drive around town. The entire transaction happens without any face-to-face interaction, and you never have to leave the comfort of your home.

In this case, though, convenience comes with a high price. At the height of its popularity, Cash4Gold was vilified for lowballing its customers, and sending checks for -- at most -- a third of the actual melt value. Regarding the allegations against the company, a Cash4Gold spokesman replied that "Cash4Gold has done nearly 1 million transactions so the 57 complaints about us represent a minuscule fraction of complaints from our customers ... Cash4Gold is a great option for customers seeking a fast, secure, simple, convenient and discreet transaction."

Controversy aside, there are far better -- if more complicated -- ways to cash in on your old jewelry.

Pawn Shops, Jewelry Stores, and Gold Parties

Pawn shops have a bad reputation as the last stop for desperate people, but they may also be one of the best places to sell your gold. In numerous comparative showdowns, pawn shops consistently emerged as one of the best places to sell precious metals. An important consideration, however, is the fact that pawn shops are a business and will try to give you as little money as possible. If you seem desperate, are in a hurry, or take their first offer, chances are that you'll get less money than you may have hoped.

The first way to maximize your pawnshop payout is by doing a little research. To get a feel for the market value of your jewelry, check online sales of similar pieces. Based on a few comparative searches, you can probably get an idea of what your piece is selling for -- and if its retail price is higher than the melt value.

While you're at it, you should also get a second (and a third, and a fourth...) opinion from other pawn shops and jewelry stores. Keep in mind, though, that even the best store will still offer you a price well below retail value. The same goes for gold parties, which have come under attack for giving participants a fraction of the melt value of their gold.

Auctions and Online Sales

If you have the time and patience, the best way to sell your gold is probably through an online sale or auction. By observing comparable auctions on eBay, you can get a good idea of how much your jewelry is worth, as well as the best way to sell it. Unfortunately, this method is also time- and work-intensive: in addition to your research, you'll need to take photos of your trinkets and set up the auction itself. If you don't have a Paypal account, you'll have to open one, as most auctions are completed through Paypal; in fact, eBay requires Paypal for many auctions.

Even if you run an online auction, you may still find that you can't get the full value for your jewelry, especially if you're charging more than a few hundred dollars. On eBay, private sellers tend to be crowded out by professional online stores, and unless you're willing to pay premium prices for prominent listings, it's easy to get swallowed up by the competition.

As the old saying goes, time is money, and the time you spend on setting up an auction for your old trinkets may not end up being worth it. The big question to consider is how much your jewelry is worth to you and how much time you're willing to spend selling it.