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Few investments have held the long-term appeal of precious metals. Silver is one of the most popular options out there, and this is partially linked to the wide array of products available. In fact, some people have even moved away from coins and use silver jewelry as an investment.
The idea that “silver is silver” has become pervasive, and in some ways, this phrase is true. There are some major differences in silver types, however, and this could have a significant impact on your investment. Before you run out to purchase silver necklaces and bangles, it’s important to know a few things.
At Silver Gold Bull, we want all of our clients to make informed purchase decisions. This means knowing all the facts — both good and bad — before buying precious metals. While silver jewelry as an investment may carry several benefits, recognizing the disadvantages is vital.
1. Much of the Value May Not Be in the Silver
Many people who buy silver jewelry don’t do so as an investment. Necklaces, bracelets, anklets, and other pieces are more commonly purchased as fashion accessories. Unfortunately, this is one of the very reasons these items aren’t typically suited for investment purposes.
When you buy a piece of jewelry, you’re not merely paying for its precious metal content. If this was the case, silver jewelry as an investment would always be a great idea. What you pay in most cases, however, has more to do with the designer than the intrinsic value of the metal.
Everyone loves quality craftsmanship, and that’s what you’ll get from high-end jewelry designers. What you won’t get in most cases, however, is a solid return on your investment. Consider some of the most popular jewelry designers out there:
- Harry Winston
- Van Cleef & Arpels
- Cartier
- Buccellati
- Graff
- Tiffany & Co.
You’ve probably heard of all these designers at some point, and that’s because they have impressive advertising budgets. Of course, that also means they’re making a ton of profit off markups. After all, they have zero reason to buy silver at spot price and then resell it at that cost.
For silver jewelry as an investment to be a profitable endeavor, you would need to find a brand without massive markups. Unfortunately, this would typically equate to lower quality and more difficulty selling down the road. The lack of a trusted brand name could also indicate a counterfeit item.
If you’re still committed to buying jewelry, consider investing in bullion jewelry. You’ll at least be closer to getting what you pay for.
2. You Get Lower Purity with Silver Jewelry as an Investment
Unfortunately for those hoping to invest in silver jewelry, finding bullion options isn’t easy. Most bullion jewelry only contains gold due to high production costs. This means when you do buy silver necklaces and other jewelry items, you’re not getting a high purity of the metal.
That’s because the fineness of silver can vary significantly depending on what you’re purchasing. For instance, most 1-ounce silver bars contain .999 fine silver. This is far from the case with silver items that weren’t produced for investment purposes.
Consider the varying purity levels of silver:
- Fine or pure silver: .999 fineness
- Brittania: .958 fineness
- Sterling silver: .925 fineness
- Jewelry silver: .800 fineness
The term jewelry silver isn’t widely used in America because most jewelry here is composed of sterling silver. This purity level can certainly serve as a great investment, but it’s much lower than other options out there. Why invest in silver jewelry when bullion coins are available?
Most people justify this move by citing price. Unfortunately, this argument doesn’t hold up. When you combine the high markups of jewelry pieces with the lower precious metal content, you’re almost always getting “less bang for the buck.” This isn’t an ideal way to invest.
If you’re committed to buying silver jewelry as an investment, make sure you pay close attention to the hallmark. Know what you’re buying and consider checking out scrap pieces that may no longer have value as a fashion accessory.
3. Counterfeit Jewelry Has Become a Problem
Whenever an item holds value, you can fully expect counterfeits to hit the market. This has become a growing problem around the world. In fact, the buying and selling of these fake items now makes up 3.3% of all global trade. This equates to over $520 billion yearly.
Unfortunately for those hoping to invest in rings and bracelets, fake jewelry is one of the largest contributors to this statistic. The best way to avoid counterfeit items is to buy new merchandise from the manufacturer. Taking this safety measure, however, ensures a costly purchase.
Trying to buy silver jewelry as an investment puts you at significant risk of buying fake items. This is because you have to pay bottom dollar for these items in order to see a profit. Designer and other premiums must be avoided, and the following purchase methods are the best ways to do that:
- eBay and other online marketplaces
- Private sellers who meet in person
- Pawn shops
- Estate sale and auction lots
While each of these options offers the chance to invest in silver jewelry, there are also significant disadvantages to each. In most cases, there’s little recourse if you purchase a counterfeit item. Other situations (e.g., meeting strangers) could be nothing more than criminals targeting you.
Unfortunately, the best ways to avoid buying counterfeit jewelry also mean higher prices. These prices are certainly appropriate for many pieces, but they’re not great investments if you’re hoping to store value with silver.
4. Others May Not See Silver Jewelry as an Investment
During the early stages of the coronavirus pandemic, demand for jewelry dropped significantly. At the same time, however, demand for bullion was rising. This shows that most people view investment silver and silver jewelry as two separate entities.
If you check out platforms like eBay, you’ll see that this doesn’t mean jewelry isn’t selling. Sellers on the site typically offer items labeled as scrap, and there’s no doubt a buyer who will bid on the listing. Unfortunately for the seller, they often don’t get the buyer pool they’re looking for.
When people want to invest in silver, it’s typically bullion bars and coins they turn to. This means you may have difficulty reselling your items when the time comes to cash in. The lower liquidity of jewelry means you may very well end up losing money on your investment.
5. Silver Jewelry Might Get Really Expensive, Really Fast
Even though jewelry sales slumped near the beginning of the pandemic, they have since picked up steam. In fact, experts expect the global jewelry trade to grow quickly in the coming years. This means jewelry prices are very likely to skyrocket in the near future.
While this may sound like a great reason to use silver jewelry as an investment, it’s essential to remember that this is not investor demand. Consumers buying these items will mostly use these pieces as fashion accessories. This means they’ll pay top dollar for designer names.
If you purchased a luxury necklace at a great price, this could result in a great profit for you. If you bought scrap jewelry just for its silver content, however, you’re unlikely to get many interested buyers. Even worse, the heightened demand will make it more difficult if you’re looking to invest now.
Unfortunately, the same market effects that make investing in silver jewelry sound so appealing also make it nearly impossible to see a profit.
Why Invest in Silver Jewelry When There’s Bullion?
Investing in silver can be an exciting venture. When not much is happening in the market, you have a solid store of value. When things like the “silver raid” pop up every so often, though, it’s fun to be part of the action. When you decide to join this world, though, you must remember that not all silver is equal.
This isn’t to say that silver jewelry as an investment won’t secure profit. The likelihood of that happening, however, depends on a variety of factors. Even the simplest of mistakes can easily result in you owning a beautiful necklace or bracelet with almost no chance of selling it on the market.
At Silver Gold Bull, we understand that precious metals investing is about more than just a large collection of items. The quality of these items matters much more than the quantity. Bullion will remain a better choice than silver jewelry as an investment, so visit our Silver Bullion page today.
