Quick Overview
- Gold jewelry can serve as a tangible asset, combining the enjoyment of wearing it with the potential for value retention due to its gold content. However, it is generally less efficient as an investment compared to traditional options like bullion or gold ETFs.
- Jewelry often comes with high premiums for craftsmanship and brand, meaning the purchase price may significantly exceed the intrinsic value of the gold, reducing potential returns.
- Reselling gold jewelry can be challenging, as buyers typically focus on the gold content and not the design or craftsmanship, which may result in lower resale value.
- For those considering gold jewelry as an investment, focusing on high-purity pieces (22K or 24K), purchasing from reputable sources, and viewing it as a long-term investment can improve its viability, but it remains more of a luxury purchase than a practical financial strategy.
In the world of investment, few assets hold the mystique and enduring allure of gold. For centuries, this precious metal has captivated humanity with its shimmering beauty, inherent value, and protection against inflation.
We personally recommend precious metals and especially gold to most investors as it can act as a stable base for their portfolio as a whole.
So, what’s the best way to invest in gold? Do you go the traditional route and purchase bars and coins? Do you use your retirement funds to invest in Gold IRAs? Or are modern exchange-traded funds (ETFs) are the better option?
While they’re all good options, you have another choice as well: investing in gold jewelry.
This approach merges the timeless appeal of gold with practicality as it is wearable instead of only sitting in a vault.
Jewelry offers investors a unique opportunity to combine financial strategy with personal fashion. But before we delve into the merits of investing in gold jewelry, it's crucial for you to see the full picture and understand the ups and downs of choosing jewelry over bullion.
The Value of Gold Jewelry
Gold jewelry, unlike other types of gold like coins or bars, is a beautiful fusion of intrinsic value and skillful craftsmanship.
If we look back in history, this type of jewelry has always been considered a common traditional store of wealth. Gold possesses unique and valuable properties, including exceptional malleability, which allows it to be easily shaped without breaking. This, combined with its rarity and durability, contributes to gold's allure as a precious metal.
The jewelry's design and craftsmanship also contribute to its allure as an investment. Pieces of gold jewelry with elaborate designs, fine craftsmanship, and added stones like diamonds or emeralds also tend to increase in value over time.
Pros of Investing in Gold Jewelry
Beyond the basics we mentioned above, there are plenty of benefits of gold jewelry investments. Let’s explore each of them in further detail:
Investment Portfolio Diversification
For starters, adding gold jewelry to an investment portfolio is a good way to diversify your holdings.
This is mainly due to gold’s historical independence from conventional financial markets — making it a desirable asset that offers a hedge against economic risks.
The same can be said for gold jewelry, as it allows you to hold the value you invested and limit losses during economic downturns and recessions.
Aesthetic and Functional Value
Unless you’re a coin collector like us, bullion gold is not very aesthetically pleasing. Sure, a well-minted gold bar might look good, but then it’s gonna gather dust in a vault.
It’s not something you can carry around with you. But, melt that bar and form it into a gorgeous bracelet and the prospect of carrying it and wearing it becomes possible. Given the timeless nature of gold jewelry, you can purchase different items based on personal style and situation.
Instead of a 5 gram bar of gold, a wedding band would provide significantly more functional value in your day-to-day life.
The best part of this, however, is that the jewelry is still gold, no matter the form it takes. So if you’re ever in need of funds, you can liquidate it easily.
Prospective Heirloom
Gold jewelry is also considered a sentimental item inherited by families and handed down through the generations.
Due to this emotional significance, gold jewelry has a value beyond its inherent worth, making it more than a financially motivated investment.
Cons of Investing in Gold Jewelry
While there is a lot for us to like about gold jewelry, it's not a perfect alternative to gold bullion or ETFs. Here are a few drawbacks of jewelry that you should know about:
Wear and Tear on Jewelry
One of the biggest drawbacks of gold jewelry is that it is likely to experience wear and tear, especially compared to other gold investments. Small chips and nicks can lower the weight of your jewelry over time.
For this reason, frequent use of gold jewelry often results in dents or damages that could lower the piece's overall value.
Difficulties with Selling
Although gold jewelry is a tangible asset, its liquidity isn't as great as gold bars or coins. This makes it difficult to find a trusted buyer or dealer who would also compensate for the markup value of the craftsmanship and design on the jewelry when purchasing it from you.
External Elements Impacting the Cost of Purchases
Current gold prices are prone to market fluctuations caused by various reasons. These include geopolitical developments, international economic circumstances, etc.
In other words, gold jewelry investors also have to worry about the same potential issues as bullion investors alongside the points we mentioned above.
Factors to Consider Before Investing
As we just established, gold jewelry comes with both benefits and risks. However, you can make a better and more informed gold jewelry investment with the right strategies and tips. These are the factors we consider when buying gold jewelry:
Only Purchase From Reputable Vendors
There is no shortage of gold jewelry vendors both online and locally. But, the one you choose should have a good reputation.
The best way to ensure this is by looking into the company’s customer reviews on reliable consumer review sites like Trustpilot and Consumer Affairs.
This way, you can cut down on your list of options, keeping only the companies with positive customer feedback.
Ensure Quality and Authenticity
Hallmarking is a process which involves imprinting the manufacturer, the purity of the jewelry with symbols, and the nation of origin.
You can use this to ensure that the jewelry you buy from a trusted dealer is high quality and authentic.
Evaluate the Gold’s Purity
Remember that a piece of jewelry's appraised worth varies depending on the purity of gold it contains.
The most common form of gold used in jewelry is 22-carat which is mixed with metals like silver, nickel, zinc, and copper to make it tougher and easier to work with. But, this type of gold is only about 91.66% pure — making it less valuable. Though, you can find highest purity 24-carat gold jewelry as well.
We suggest that you carefully consider the most appropriate gold alloy options for your jewelry investments before proceeding further, so you have good value once you’re ready to sell it.
Assess Your Ability to Take Risks
Don’t put all your eggs in the same basket. This is the golden rule of investment and applies just as much to gold jewelry. It limits the risk and loss you face in case that single investment loses its value.
The thing about jewelry that makes it more risky is that it’s not hidden away in a secure vault in a bank or in your home. When you’re wearing it on your person, your gold investment is at a higher risk of getting stolen, or getting lost.
Make sure your investment portfolio can handle this risk before putting any money in jewelry.
Conclusion
From what we’ve seen, gold jewelry comes with its fair share of investment benefits and risks.
It is ideal for investors in specific situations. For instance, if you're a seasoned investor who’s already holding precious metals, you can diversify your portfolio by adding gold jewelry.
However, if you’re a beginner navigating through precious metals investment options, holding a gold bar or coins would be smarter.
Ultimately, it’s essential to consider the pros and cons of gold jewelry investment with your specific investment criteria to better determine the viability of a gold jewelry investment.