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In the world of precious metals investing, nothing glitters quite like gold. It has served as a tremendous store of value throughout the ages, and there are countless items you can purchase containing the material. In fact, people have even used gold jewelry as an investment.
There are a variety of benefits offered to those who go this route. After all, who wouldn’t love a great investment that can also serve as a fashion accessory? You can get long-term use out of the item and then resell it on the open market. That sounds like a win-win, right?
Unfortunately, investing in gold jewelry doesn’t often pan out like investors would hope. There are many factors to consider, and overlooking even one aspect can turn costly. With the following information, however, you’ll be able to make more informed purchase decisions.
1. Investing in Gold Jewelry Means Lower Purity Levels
Any kind of gold you own holds some value. Unfortunately, not all gold items are equal. This is how some of the biggest mistakes happen. A piece of gold jewelry could weigh twice as much as another item and still contain less of the precious metal. This is because of purity standards.
When you buy gold bullion bars, jewelry, and some other items, you’ll notice they usually feature a hallmark. This lists the item’s precious metal content in karats — a measure of purity. Two items of the exact same weight with different purities will vary significantly in gold content.
Unfortunately, investing in gold jewelry typically means you’re getting a lower precious metal content. Consider the following number of karats along with their gold purity percentage:
- 9 karats: 37.5%
- 10 karats 41.7%
- 12 karats: 50%
- 14 karats: 58.3%
- 18 karats: 75%
- 22 karats: 91.7%
- 24 karats: 99.9%
If you’re buying jewelry, the item will typically fall between 10 karats and 22 karats. You may be able to find bullion jewelry at 24 karats, but they are hard to come by because alloy metals add strength to items. If you’re looking to get high-purity precious metals, jewelry typically isn’t the way to go.
Most investors interested in pure bullion opt for gold bars and coins. When you purchase from reputable dealers, you’ll know exactly what you’re getting with these items. Bars come from respected refineries, and trusted mints create the coins available on the market.
Gold jewelry as an investment can certainly add value to your portfolio, but bullion typically gives you more “bang for the buck.” Knowing the purity of a piece of jewelry, however, can help you make more informed decisions. Unfortunately, people often still end up paying too much.
2. You’ll Often End Up Paying for a Designer Name
In Romeo and Juliet, the female titular character asks, “What’s in a name?” When it comes to buying jewelry, that answer could be “a few thousand dollars.” Jewelry manufacturers don’t make products for investment purposes, so the designer name will always cost you more.
Of course, you’ll pay more than gold’s spot price even when you purchase coins and bars. This is known as a premium, and it covers the many costs of getting the precious metal to you. Those who use gold jewelry as an investment, though, face even higher premiums.
In some ways, a higher price tag is necessary to cover production costs. For instance, an intricate necklace always costs more to produce than a gold coin. It’s the brand name, however, that really counts. If you buy from any of these jewelry producers, you can expect to spend big bucks:
- Buccellati
- Tiffany & Co.
- Graff
- Cartier
- Van Cleef & Arpels
- Harry Winston
When you spend money on expensive jewelry, you’re unlikely to ever see a profit. Even if you sell it to a buyer who wants it for the designer name, you’ll get less than what you paid because it’s considered used. Owning high-end items like this is more of a status symbol than anything else.
Of course, it’s possible to invest in gold jewelry without breaking the bank. You can easily find listings for scrap jewelry on eBay and other platforms. “Scrap” indicates that the item is no longer suitable for its original purpose. A broken necklace would fall into this category.
Unfortunately, going this route involves risk. First and foremost, it’s difficult to know if an item is counterfeit when looking at an eBay listing. Hallmarks can easily be faked. The biggest reason to avoid these listings, however, is that you can typically find new bullion items for similar prices.
3. Investing in Gold Jewelry Should Preclude Wearing It
Many people who buy jewelry as an investment don’t just toss it into their safe. The appeal of these items is that they offer a store of value and a fashion accessory. You can spruce up your outfits for years and still have a solid investment if you ever decide to sell.
While this is great in theory, it actually puts your money in danger. Could you imagine walking around with a 1-ounce gold bar loosely attached to your wrist? Have you ever just carried $2,000 in cash on an easily breakable cord around your neck? Most of us would never do such things.
Unfortunately, that’s essentially what you’re doing when you wear gold as an accessory. Reported jewelry thefts nearly doubled in 2019, and there’s no reason to think this trend will simply go away. If you want to wear gold, choose lower purity items or opt for faux gold.
If you want to buy gold jewelry as an investment, though, you should store it like you would any other precious metal.
4. Counterfeit Gold Items Are a Massive Issue in America
When something holds value like gold, counterfeit items will always exist. In fact, we’ve discovered fake gold coins dating back to 600 BC. Fraudulent items now make up more than 3% of global trade, and unfortunately for those who invest in gold jewelry, these items are near the top of the list.
Of course, jewelry is far from the only gold item that criminals counterfeit. If you invest in American Gold Eagles or other coins, you could just as easily fall victim to a scam. Luckily, there are easy ways to avoid being taken advantage of. Similar methods can get expensive, however, when dealing with jewelry.
The best way to avoid counterfeits is to buy from reputable dealers. When purchasing bullion, this is as easy as shopping with an established company like Silver Gold Bull. This same reasoning holds true when investing in gold jewelry, but you’re going to pay jeweler’s prices.
As this guide has already touched on, this can get very expensive. You will certainly pay premiums when buying from bullion dealers, but this is nowhere near the markup you’ll pay on a brand name jewelry item.
5. Demand May Quickly Rise, But That’s Not Always Good
The global jewelry trade took a hard hit near the beginning of COVID-19. It has since rebounded somewhat, and analysts even expect it to grow quickly over the next few years. While this certainly sounds like good news for those investing in gold jewelry, there are a few nuances.
Most importantly, the investors seeing big returns are the ones who already own jewelry. Buying when demand is high makes it much more difficult to turn a profit. Additionally, the rising demand is unlikely to benefit anyone who was able to find jewelry at a low price.
That’s because demand isn’t rising for scrap jewelry. People want designer items they can wear — not old necklaces suitable only for investing. Most people don’t see jewelry as something to make a profit from, so unless you’ve got high-quality items, increasing demand likely won’t help.
Why Invest in Gold Jewelry When You Can Buy Bullion?
There are very real benefits to owning gold jewelry. After all, having jewelry in your portfolio is better than having no precious metals at all. Before you purchase anything, though, it’s important to know the drawbacks. This can help you make more informed investment decisions.
While this guide focuses on many of the pitfalls inherent to investing in gold jewelry, this doesn’t mean making such a purchase is a bad idea. As long as you know what you’re getting and buy at a decent price, it’s very possible to turn a profit when you go to sell your item.
Of course, you can avoid these pitfalls altogether with gold coins and bars. There’s always demand for these physical investments, and high liquidity means you can sell them whenever you need to. Stake your claim in the world of precious metals and visit our Gold Bullion page today.
