Buying Gold Jewelry as an Investment

Buying gold jewelry as an investment may seem like a sound financial decision, but the process isn't as simple as it may appear. Firstly, not all gold jewelry is suitable as an investment purchase. Secondly, investment-grade gold jewelry must be found at a price near the market value or the investor stands to lose money. Gold jewelry is a convenient and enjoyable way to preserve wealth, but it takes know-how to find jewelry worth investing in.

Function

Buying gold jewelry as investment is done to preserve wealth over the long term, generally for several decades. Gold jewelry is also a way to pass wealth down through the generations in a form that has not only monetary value, but also artistic and sentimental value. Some buy gold jewelry so they can enjoy their wealth, rather than leaving it sitting unseen in a bank. Others invest in gold jewelry so that they can easily transport their wealth.

Benefits

Gold jewelry holds value against inflation, so it doesn't lose its monetary value over time the way paper money does. Economist John Webster notes that from 1978 to 2008, gold has brought a rate of return of 0.43 percent per year when adjusted for inflation. Unlike with stocks, there's no risk of gold completely losing its value. This is because gold metal itself has intrinsic value and can always be sold for some amount of cash. Gold jewelry is also easy to transport and can be stored at home, so there's no risk of being unable to access or move it in case of economic crisis or civil unrest.

Features

Investment-grade gold jewelry should contain a high percentage of pure gold. The higher the number of karats, the more gold the item contains. For investments, choose 24 karat (pure gold) or 18 karat (75 percent gold). This gold is relatively soft and is typically used in necklaces, earrings, or brooches, which are less likely to be knocked against hard surfaces. Jewelry that may contact hard surfaces, such as rings, bracelets, and anklets, is usually 12 to 14 karats, meaning they contain less gold.
Gold jewelry from a well-known designer such as Cartier, Tiffany, Harry Winston or Bill Pearlman, as well as antique gold jewelry, is exceptionally valuable. These items carry value well above the price of gold they contain the due to their cachet, superior craftsmanship, unique design and/or age.

Considerations

The price of gold, like the price of all commodities, fluctuates. That means the cash you can get for gold jewelry now may be more or less at any given point in the future. In order to profit or avoid loss by selling your gold for cash, you may need to wait for the price of gold to increase.
Gold has proven to be a less profitable investment than stocks over the long term. As economist John Webster notes, from 1968 to 2008, the Dow Jones carried an average rate of return of 1.56 percent when adjusted for inflation, which is more than three times higher than gold's rate of return for a similar period.
Although there's always a market for gold jewelry, buying gold jewelry as an investment takes skill. If you buy gold jewelry retail, you'll pay up to 300 percent more than the value of the actual gold in that jewelry. If you sell it back to a retailer, however, you'll be paid only the wholesale price, meaning up to 300 percent loss of investment. That's why it's important to find sources of quality gold jewelry at wholesale prices.
Because gold jewelry is so easy to move, it can also be lost or stolen more easily than money in the bank or in paper investments.

Potential

Statistics from the World Gold Council show that while jewelry still accounts for approximately 75 percent of world demand for gold, demand for gold jewelry decreased by 6 percent between 2007 and 2008. Due to the fall in stock prices and other asset classes, investor interest in gold increased in 2008.