Gold Party Rages On

Five years ago, if someone told January Thomas that she would be checking the price of gold on the commodities market as frequently as she checked email, the onetime marketing and sales executive might have laughed.

But now, the 32-year-old founder of My Gold Party, is watching one of the world’s most volatile exchanges rise and fall every day, and it has not been dull. As investors watched the Dow drop 512 points Thursday, gold was trading at around $1,660 an ounce, hitting a record $1,681 before dipping to $1,647 by day's end, but generally continuing on the upward trajectory that it has been on throughout the recession and the debatable recovery.

Why the fascination with gold? When stocks seem unstable, as they certainly have been since the financial crisis began in 2008, investors will push money into gold as a commodity that will hold its value. That investor interest drives up the per-ounce price of the precious metal, which is expected to hit a record of $1,700 soon.

Higher gold prices are good news for My Gold Party, which is in the business of operating home-based gatherings where a hostess typically invites friends over for an evening of wine, cheese, and commerce.

Unlike Tupperware or Pampered Chef parties, guests are not buying, they're selling gold items plucked from their jewelry boxes, such as broken necklaces, outdated-looking Mr. T-type chains, and orphaned hoop earrings. In exchange for the stuff they don't wear or want anymore, they get cash.

Thomas stumbled upon the idea of turning old gold jewelry into a business in 2007, after she married an attorney whose family owned a jewelry store in suburban Detroit. After her brother-in-law weighed her old gold jewelry and informed her how much it was worth if it were melted down, she was surprised, and thought others would be too.

“I thought there had to be people older than me that had even more gold jewelry,” Thomas said.

Apparently there were. At first, the business started out small: She and her husband spent a couple of thousand dollars of their own money on the basics: a website, computers, phones, and supplies for herself and the representatives who gradually came aboard to throw the parties.

In My Gold Party's home base of Grosse Point, Michigan, near Detroit, the concept of selling gold for cash took off among families affected by layoffs among the nation’s big three automakers. Gradually, it became a national operation, as friends told friends about the opportunity to make money by hosting gold parties.

“The last couple of years, it’s grown tremendously,” said Thomas, who has four employees, overseeing the operations of reps nationwide. “We now have 95 reps in [more than 30] states. There are still some states and areas that have not heard of it.”

The business works as follows: Reps, who often decide to throw parties after attending one themselves pay $696 plus shipping for an electronic gold tester, a scale, a jeweler’s loupe, and a how-to book for organizing the evening.

Such events typically draw between five and 20 people, often carrying gold jewelry worth between $200 and $300 apiece. That value is based upon its weight, and its karatage, or the amount of gold contained in the jewelry, with 14-karat gold worth less and 18-karat gold worth more.

My Gold Party attendees receive 65 percent of the spot price of the gold on the commodities market that day. Another 20 percent goes to My Gold Party, the company, and 15 percent goes to the representative who throws the party.

So for an event that probably lasts a few hours, and brings in a total of $2,000, the host would receive $300 for holding court, and My Gold Party gets $400. The rest goes to individual attendees. Some reps have stayed on since the beginning, others have used it to supplement income. The holiday season is a favorite time to throw parties while the summertime is slow.

Thomas declined to say how much her company is making in revenues, but with gold prices up in recent years, she has seen a rising number of competitors. Her rivals include Cash4Gold, which urges people to mail in their unwanted gold, independent jewelers who invite customers to sell their unwanted gold in exchange for cash or store credit, and regional gold-party companies, like one based in Florida called Gold Does Good, run by “golden girls” who help people raise money for charities or organizations via the parties.

Thomas said that as her business took off over the years, she has received investment money from family members to keep it going. The company started handling refining the gold on its own rather than having reps send it off to refineries, and it is also now handling silver jewelry. But gold remains the prime focus, and with the market volatility, it doesn't look like she'll stop watching the gold exchange anytime soon.

“I though gold hitting $1,000 was big, and then I thought $1,200 would be big, but it’s just kept on going,” Thomas said.

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Teresa Novellino writes for Portfolio.com