A few weeks ago Mary Griffiths went to a party with a difference. She dressed up as usual but took with her a pair of broken earrings, a wonky bracelet and a necklace that had worn thin, plus assorted jewellery that her daughters had discarded. At the party, a man offered to buy the lot.
"If I'd got £20 for it, I'd have been happy," Griffiths says. "But I got £200."
Her buyer was not just any man. He was a representative of Ounces to Pounds, one of several companies helping people to throw "gold parties" all over the country to take advantage of the extraordinary rise in the price of gold.
The price, at an all-time high, reflects a rush to gold on the part of individual and corporate investors alike. Banks, too, are flocking to invest. Such is the hysteria that the United States has run out of American Eagle gold bullion coins and HSBC in New York has had to close its vaults to individual investors. So instead of taking to the hills to prospect for nuggets, people are rummaging in their jewellery boxes.
Last week Griffiths hosted a gold party of her own at home in Hornchurch, Essex. No longer owning any superfluous gold herself, she invited friends and relatives to sell their possessions. The first of her guests to meet the man with the scales came away £1,050 richer, while Griffiths's sister-in-law was paid £250 for broken necklaces and odd earrings.
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"A lot of people who came tonight have said to me as they left, 'That's sorted us out for Christmas'," says Griffiths - who was rewarded by Ounces to Pounds with 10% of the takings for hosting the party.
Ounces to Pounds was founded by an American, Krista Waddell. A former advertising executive, she had started trading gold while at home in Las Vegas after having a baby.
One day, in the shower, she dreamt up the idea of hosting a gold party, where "upmarket ladies who would never be seen in a pawnshop", could get rid of outmoded items they had amassed over the years and didn't know what to do with.
"I talked to my mum and she called one of her girlfriends who is extremely sociable," says Waddell. "She said that my first party would be in three weeks. I had to rush to get my company set up so that we could start."
A year later Waddell happened to be visiting the UK and noted the doomy economic climate, so she decided to unroll her gold party idea here, too. Others, meanwhile, were jumping on the bandwagon. Howard Levy of northwest London was visiting America earlier this year and saw television advertisements promoting gold parties:"I thought, what a fantastic idea."
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Levy had worked for many years recovering precious metal from the dental industry, smelting it, assaying it, then selling to refiners. Collecting gold at parties couldn't be too difficult, he thought. Now his company, Your Gold Party, is doing 40 parties a month.
What are the parties like? Well, they're not aimed at men, that's for sure. One of the companies promoting them says this: "Relax in your own home as you chat about the various things you will do with your new-found money. If an ex-boyfriend gave you gold jewellery that you are now selling, you can tell your break-up story to your friends."
Traditionally, people rush to buy the soft yellow metal during periods of political uncertainty, says Mike Temple of Gold Investments, a bullion trading firm. These have included the bursting of the dotcom bubble, the September 11, 2001 attacks and the current global economic crisis. "People take money out of banks when they think banks might collapse and they buy gold when currencies look weak," says Temple.
The value of the metal has also been pushed up by the fact that production by mining companies has been steadily declining since 2001. "South Africa used to produce 1,000 tons a year but now is down to 220 tons," says Temple. "Russia fell right down because they let their mines go. Now they're trying to reverse that."
Yet for ordinary investors it has become a lot easier to buy gold - or at least a version of it. Where previously savers might have bought shares in goldmining companies, since 2003 they have been able to buy exchange-traded investment funds, enabling them to profit from the current worth of gold without the hassle of actually owning any.
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At the end of October the various exchange-traded funds together accounted for some 1,738 tons of gold, worth about $58 billion (£32 billion).
Not everybody is happy to invest in a piece of paper, says Sandra Conway of ATS Bullion, a company trading in gold: "People want something tangible in case there is a financial meltdown. They want something close to hand, which they regard as safer than having a piece of paper saying they're holding gold somewhere."
Conway's customers in the Strand, central London, include elderly ladies who want to buy a half-sovereign as a christening gift as well as people wanting to invest £500,000 in gold bullion. "They either take it home to put under the mattress, or put it in the bank, or else we arrange storage," she says.
One of the most popular items for sale, she adds, is the krugerrand, the universally acceptable gold coin. The 1oz coins cost about £775 each. A smaller item is the sovereign, which at just under ¼oz costs about £192 and is exempt from capital gains tax. "We sell an awful lot of those," says Conway.
It was partly to cater for amateur gold investors that Harrods decided to enter the bullion business in October. It is such an unfamiliar asset for most people, says a spokesman for the London store, that they want the comfort of buying it from their favourite shop, "someone they trust". (For those unable to take advantage of this service, Harrods also sells souvenir chocolate versions of the gold bars for £9.95 in its food hall.) Can gold really be a good investment at today's high prices? Since 1971, bullion has risen by an average of 8.5% a year, compared with average annual inflation of 4.5%. But if you bought at the last time prices peaked, in January 1980, gold would have returned just 1.2% a year, compared with inflation of 3.3%.
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Some forecasters warn that commodity investors who have piled into gold might wreck the market by pushing gold's price too high - making a crash inevitable. A few people have come to Conway to sell their gold holdings. "But not as many as you might think. Many are worried about what to do with the money anyway - you don't get a good return on it," she says.
So it looks as if the craze for gold parties will continue. In which case, disreputable dealers will almost certainly try to rip off party guests, as seems to be happening a lot in America.
As Conway sees it, there's no saving some people from themselves: "A lady on TV had a gold cigarette case. She was offered £700 for it and it turned out that the scrap value was £1,000. The antiques dealer said he would give her £800. And she said, 'Okay, then'. That's what you're up against."
Waddell and Levy insist their own reputations are, ahem, untarnished. "We do no advertising and 75% of our business is by recommendation, so we must be doing something right," says Levy.
Waddell concedes that Ounces to Pounds pays only 60%-80% of the spot price of gold, but points out that her company's costs include storing, cleaning and smelting, then pouring the collected gold into bars. She also claims to have research showing that she pays more than pawnshops or postal buyers.
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Ounces to Pounds accepts gold through the post and undertakes to open the package live on camera using Skype, the system that allows phone calls to be made over the internet. But Levy is sceptical about sending gold in the post: "Even if they're opening your parcel with a live webcam, you don't know what the items weigh, or how many carats there are. I think you would have to be barking mad to send it by post."
As to the matter of his own profit margin, Levy says this: "It's like anything. If you search the internet to buy a car, you will find a lot of different prices for the same thing. If someone can be bothered to go to Hatton Garden [London's jewellery district], they will get a better price than from us, but who has the time to do that and have they got the quantity to make it worthwhile?"
With the average event raising sales of between £2,500 and £3,000, it looks as if hosts such as Griffiths will continue to find gold parties lucrative, as will the charities that organise many of these parties for the same 10% fee.
"It's a great way to fundraise," says Levy. "You're asking people to donate but they don't have to physically put their hands in their pockets."
Sold out
Between 1999 and 2002, Gordon Brown sold off more than 400 tons of UK gold in what is now known as the "Brown Bottom". In this transaction, 12.86m ounces were sold off at an average price of $275 (about £167 at today's rates), generating $3.5 billion - and marking a 20-year low in gold prices. As Ross Norman, director of thebulliondesk.com, comments: "It wasn't clever ... If we were to repeat the calculation for the value of the metal at today's prices [$1,214 per ounce], we would reap $15.6 billion. This is a net loss of $12 billion to our economy."