Scrap gold is defined as the gold (or gold jewelry) that a person has no use for other than it has some value.. The gold might be in broken and damaged items, or even gold used in a dental purpose. Having such gold sitting around at home gathering dust in a cupboard is a complete waste to you.
Therefore, the way to get some value from it is to sell it to a gold buyer who deals specifically in scrap gold.
Since the gold and/or jewelry is basically unwanted because it no longer serves its purpose, its value will be significantly lower that if it was, for example, a fine piece of custom jewelry.
Therefore, the main source of profit for gold dealers is to sell the scrap gold to gold refiners. When the gold dealers obtain the scrap gold with lower market value, they can immediately sell to gold companies with high market value. On the contrary, if the selling price to the gold companies is not good, the gold dealers can keep the reservation first. Until the price is good, the gold dealers can sell again.
Refineries collect the unwanted gold and melt it down so they can resell it. The reused gold can be used to create beautiful jewelry again. Therefore, the refineries are the main constant source of profit for the gold dealers. Since the refineries are required to spend cost for reprocessing the unwanted gold, the selling price for the gold dealers is less than the market value. Selling gold to refineries might not have high profit margins, however, it is the stable source of profit and the scrap buyer can try to time the selling to the refinery to coincide with upswings on market gold prices.
Resale the scrap gold might be one kind of profit source for gold dealers. Some scrap gold might not have damage nor broken. They are just dirty. By little repairing or cleaning, the scrap gold can be resold. However, resale might not be a reliable source to make profit. It was because not many people are willing to buy scrap gold.
So, the scrap gold buyer can sell on the gold to a refinery at a higher price than they paid the seller. They can hedge the time between buying and selling to make more (or less) depending on how gold prices move – remember that many scrap gold buyers have to keep gold for 30 days after purchasing – or they can re-purpose the scrap gold by making it into new pieces if they have the capability to manufacture jewelry.
The bottom line is that the less they pay the initial seller, the more profit they will make.