You can always tell whether a person has gold fever or not. When you show someone your gold, the person unaffected by the malady usually has only one question: “How much is that worth?”
The same is true of some gold paydirt buyers, but their preoccupation is on the “ROI” (Return on Investment).
It seems that almost every gold paydirt reviewer on the internet has adopted an “ROI” measurement as part of their assessment to gauge whether a given supplier’s paydirt is any good or not.
They are attempting to provide a reliable means of grading paydirt suppliers, and for measuring the value of the gold contained in their respective shipments...an industry full of crooks and scam artists. An objective assessment can certainly be of value in sorting out the good guys from the bad guys.
However, 99% of the gold paydirt reviewers on the internet misuse the ROI term, Return on Investment. Click here for an accurate explanation and calculator.
Simply stated, if a paydirt shipment costs $100 and yields $75 worth of gold, then the true ROI is -25%. If it returned $125 worth of gold the ROI would be +25%. You see, a return on an investment that is worth less than what it costs, is considered an negative ROI.Those who misuse the ROI, would call these returns 75% and 125% respectively.
There is only one paydirt reviewer that I am aware of who, to his credit, calls the ROI “Recovery of Investment” and thus avoids the misuse of the classic ROI definition.
But what I really want to address is the overemphasis on the ROI metric in terms of gold paydirt purchases.
As far as I’m concerned, anyone whose primary concern is ROI, SHOULD NOT BE BUYING GOLD PAYDIRT IN THE FIRST PLACE. Why? Because…
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It’s the “I” in ROI…Investment. Placer gold, in general, is not an investment.
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A paydirt seller is not going to knowingly sell you his gold for less than what he thinks it is worth, which is usually the spot price per ounce plus a premium.
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In order for an investment to increase in value, you have to be able to sell it for more than what you paid for it.
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The long-term chart for the spot price of gold has peaks and valleys. If you bought gold in 2011, your “investment” is worth far less today than what you paid for it. See this chart.
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While the Spot Price of gold is a good relative measure of the value of gold on the world’s commodity and bullion markets, it bears little or no significance when it comes to the value of the placer gold commonly found in paydirt shipments.
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Placer gold purity varies widely. Technically, the spot price of gold is for pure, 24 kt., .99999 finegold. See this Blog
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However, purity only matters if you are trying sell your gold to a refiner. The refiner will typically test your gold before they make you an offer to determine how much they are willing to pay for it – purity is everything to a refiner.
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The Nome Alaska gold dredging fleet typically gets 80% of spot for the their gold and have recently moved away from selling raw placer gold to melting it down into doré bars which increases the value of their gold by reducing costs to the refiner.
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The value of any item, regardless of what it is, is always equal to whatever someone is willing to pay to obtain it. This is a basic principle of supply and demand economics. No one in their right mind would buy placer gold over the spot price for the purpose of melting it into doré bars and selling it to a refiner – they’d be losing money - refiners always pay less than spot for gold because all that matters is purity
You make some very good points, however, they are lost in your argument over ROI. I think it is merely semantic. I think very few people, when they use the term ROI, in the context of buying or evaluating pay dirt, use it in the sense of an investment ROI. You’re right it is a misnomer to really be calling it a “return on investment” but I don’t think it is necessarily incorrect to say your “ROI” was 75% or 125%. I think most people read that as 75% of what they spent, is what they can expect in gold value recovered. In the case of 125%, most people read that as they recovered 125% of what they spent. These would be a net loss of 25% and a net gain of 25% respectively. From the hundreds of videos I’ve watched on you tube from dozens of reviewers, many may semantically be misusing the term ROI, but none misrepresent what they are saying, it is quite clear in the context of the videos and reviews what they mean. No one is saying they had a 75% or 125% net gain. That would be more concerning to me. I think your message would be better served by condensing the ROI part and focusing on things that are rarely mentioned in the reviews that you also brought up.
1)Pay dirt gold is rarely 24k, most valuations done in review videos use 24k value, and it costs money to send to refiner (they’ll pay less than spot)
2)No seller is giving a way “free gold.” You will always pay spot + shipping, fees etc.
3)Take shipping into account in your “roi” calculation, that is often ignored
4)gold markets swing, there has been a lot of volatility in gold- the value is always changing, sometimes drastically
5)pay dirt gold isn’t an “investment.” Buy bullion, coins etc if you want to invest in gold
6)the spirit of paydirt is really about fun, testing your skill, not striking it rich
Works been slow, dog came down needing surgery. So I sold enough of my gold an silver stores to pay for his surgery an finally place an order with you. I’m going to take it to Ma’s in Iowa an pan it out with her so she can see a little bit of what I did in Colorado. Itll be a good memory for her. Thanx for that opportunity Mr. Glad to finally do biz with ya
Anyone who measures ROI from paydirt should try buying all of the equipment and spend the HOURS and DAYS it takes to recover gold! They may appreciate what is in their pan when they are watching TV on their patio…
If one wants to “invest” in gold, buy refined gold products!
Hey Mike,
Excellent read however I tend to disagree alittle.
Many home panners like myself love panning but also struggle to buy our dirt and do look for as much gold as the seller is willing to supply.. Spending 80.00 on a guaranteed Gram seems expensive.
Yes the fun may be there, but we are Gold Hoggs.
I want as much gold as I can afford.
Shopping around I have found out the hard way that value matters.
I expect the seller to make profit.
The buyer expects value for his purchase.
Finding the balance is the Challenge.
Honestly, I’ve hesitated on purchasing your material in fear of not getting my higher value .
I’m am good friends with a popular reviewer and he does have good remarks for you guys.
Perhaps next month I will make a purchase and form my own opinion.
GOLD LUCK TO ALL
Couldn’t have said it better. The term return on investment is in itself incorrect. The goal with a investment is to invest with the goal of making money not losing money. Purchasing Paydirt is not an investment in the true sense as you know you will lose money as soon as you purchase. The motivation to buy Paydirt should be the allure of testing your skills in separating the pay from the dirt and the surprise of possibly finding something really special you might not find on an outing of your own.