The three numbers
Take an 18k gold ring weighing 6 grams with a half carat diamond. Its melt value is $634.60, since the stone contributes nothing to metal weight. Its insurance replacement appraisal might be several thousand dollars. What a jeweller hands you across the counter is a third number, lower than the appraisal and usually higher than melt because the diamond has some resale value.
All three are correct. They answer different questions, and the trouble starts when somebody walks in holding the answer to one question and expecting it to settle another.
Melt value
The market worth of the metal, and nothing else. It is computed, not estimated: weight times purity times the spot price. It ignores the design, the maker, the stones and the condition, which is why a mangled chain and a perfect one price identically per gram.
Melt is the right number for scrap, broken pieces, unmarked estate gold and anything mismatched. It is a floor rather than a valuation for anything else, and it is the only one of the three numbers you can work out yourself in under a minute.
Appraisal value
An insurance appraisal states what it would cost to replace the item with one of like kind and quality at retail today. It includes the metal, the stones at retail prices, the manufacturing labour, the shop margin and often a margin on top of that so the insurer is not short. Three to five times melt is normal, and on a heavily designed piece with good stones it can be far more.
That document is doing its job. Its job is to make an insurer pay enough after a theft that you can walk into a shop and buy a comparable ring. It was never a statement about what somebody would give you for the ring, and an appraiser who lets a client believe otherwise has done them a disservice.
There are other appraisal bases, and the basis should be written on the document. Fair market value, used for estates and divisions of property, is what a willing buyer would pay a willing seller for that item as it is. Liquidation value assumes a forced, fast sale. The three can differ by a factor of five on the same ring.
Resale value
What you will actually be handed, and the only one of the three that is a real offer. For scrap it is a percentage of melt, typically 50% to 85% depending on the buyer and the lot. What buyers actually pay sets out the ranges.
For a piece with genuine resale interest it can be well above melt, because the buyer intends to clean it and put it in the window rather than melt it. Signed work, period pieces, branded designer jewellery, good coloured stones and decent diamonds all fall here. The routes are a jeweller who buys second-hand, a consignment arrangement, an auction house for the better pieces, or a private sale if you have the patience.
Deciding which applies to you
Ask one question: would somebody want this object, or only the metal in it? If it is anonymous, broken, mismatched or unfashionable to the point of being unsellable, melt is your number and the calculator gives it to you exactly. If it is signed, hallmarked, period, or set with anything above an accent stone, do not sell it by weight until somebody who knows the category has looked at it.
Melting is not reversible. The refiner is not doing anything wrong by buying a Georg Jensen brooch at scrap price if that is what you offered them. They are buying metal, and the responsibility for knowing that it was more than metal sits with the person handing it over.
Valuation questions
What is the difference between melt value and appraisal value?
Melt value is the metal alone. An insurance appraisal is the retail cost of replacing the item new, including design, labour, stones and shop margin. The appraisal is routinely three to five times melt, and it is not an offer from anybody.
Why will nobody pay my appraisal value?
Because an appraisal is a replacement cost, not a market price. It answers the question an insurer asks. Nobody buying a second-hand piece pays what it would cost to commission a new one, any more than a used car sells for its list price.
What is fair market value?
What a willing buyer would pay a willing seller for that specific item in its current condition, which for most second-hand jewellery is somewhere between melt and half of retail. It is the number an estate or divorce valuation uses, and it is different again from an insurance figure.
Should I get my jewellery appraised before selling it?
Only if you suspect it is worth more than its metal, which is the case for signed pieces, period designs and good stones. A formal appraisal costs money and produces a number no buyer will pay. For plain scrap, the melt calculation is all you need.
Does an appraisal help me negotiate?
Not much with a scrap buyer, who is pricing metal. It helps a great deal when selling to a private buyer or a consignment jeweller, because it establishes the quality and the specification of the stones in writing.
Why is resale value so much lower than retail?
Retail includes design, manufacture, distribution, shop overheads and margin, and those costs do not survive the first sale. The same happens to furniture and cars. Precious metal is the one part of the price that holds, which is why melt is the floor.
Which number should I use to insure my jewellery?
The insurance replacement appraisal, prepared by a qualified appraiser and updated every few years as metal and stone prices move. Insuring at melt value would leave you unable to replace the piece after a loss.