Is Scrap Gold Worth Buying?
Some people wonder, “Isn’t it more profitable to buy gold from pawn shops instead of investment gold?” The term used for this type of gold is “scrap gold.” It is usually an aggregate of used gold jewelry, medical gold. In this article, we thoroughly explain what this type of gold is and what risks it poses compared to investment gold.
1. Investment gold
What it is:
- Investment gold is usually in the form of bars or coins of high purity (99.9% or 24 carats).
- It is exempt from VAT in most countries, including Bulgaria.
- Easily bought and sold on world markets.
Pros:
- Liquidity: You can sell it very easily, especially if it’s certified. There is a big market for investment gold.
- Tax exemption: in Bulgaria, investment gold is exempt from VAT, which means that you do not pay any additional costs when buying.
- PURE VALUE: Since the purity of gold is guaranteed, you are actually investing in the metal itself, not impure alloys.
- Long-term security: Historically, gold has retained its value regardless of inflation or economic instability.
Minuses:
- Higher initial price: when you buy investment gold, you pay a premium (a premium) over the spot price of gold.
- No quick profit: investment gold is better suited for long-term investments, not short-term speculation.
- Storage: you should keep it carefully (in a safe or bank) to avoid losses.
2. Gold as scrap
What it is:
- This is gold in the form of jewellery, coins of mixed purity, gold scrap or other materials containing gold. It is often of lower purity (e.g. 14K, 18K).
Pros:
- Lower price : Gold scrap is usually bought at a lower price than investment gold.
- Opportunity to profit from processing: if you buy gold as scrap at a bargain price, you can process it or sell it for a higher value.
- Flexibility: you can buy gold in parts without investing large sums at once.
Minuses:
- Unclear purity: gold scrap is often a mixture of other metals (silver, copper), so you have to pay for assaying or refining to determine the pure gold content.
- Taxes: gold as a material is usually subject to VAT on purchase, which instantly makes the investment 20% more expensive
- Harder to sell: unlike investment gold, scrap does not always have a stable and secure market.
- Very common fraud and abuse in the purchase and redemption of this type of gold
Comparison: Investment Gold compared to Gold as Scrap
| Criterion | Investment gold | Gold as scrap |
|---|---|---|
| Purity | Very High (99.9%) | Various (14K, 18K, 22K, etc.) |
| Liquidity | Very high | Harder (depends on purity and shape) |
| Taxes | Excluding VAT | Subject to VAT |
| Profit potential | More suitable for long-term investment | Better suited for short term profit |
| Market value | Always close to the world price | Lower, depends on purity |
Which is more profitable in the long run?
- Investment gold is a better choice if you are looking for stability, liquidity and long-term value preservation. It is directly influenced by world gold prices and is preferred by large investors.
- By buying investment gold you can“sleep easy“. Buying investment gold from a licensed dealer, you will be sure that one day when you decide to sell the gold will not turn out to be a fake that you have kept in the safe for a long time.
Which is more profitable?
- If you have knowledge of the markets and can buy gold as scrap at low prices and then process and sell it, you can make more profit in the short term. But it involves more risk and effort.
Conclusion:
- If your goal is long-term investment and preservation of the value of money – choose investment gold.
- If you’re looking for more flexible profit opportunities and are willing to take more risks, and especially have the skills and experience to work with gold items – you might consider investing in gold scrap.
Use these links to explore the sections of the Investment Guide:
- How to Buy Gold
- Gold Bars or Gold Coins?
- Gold or Silver?
- Gold Silver Ratio Explained
- Best Time to Buy Gold?
- Is Gold a Good Investment?
- Why Invest in Gold?
- Why Buy Physical Gold?
- Where to Buy Gold?
- Why Buy from Gold Reserve?
- Top 10 Gold Producers
- Top 10 Gold Reserves
- 2025 Gold Price Forecast
- Is the Sale of Investment Gold Taxable in Bulgaria?
- Precious Metals Glossary
