If you’re keen to invest in gold, but the idea of bullion bars, coins and rounds doesn’t sound interesting, you might consider investing in gold jewelry. Investing in the staying power of gold by buying high-quality jewelry can be a convenient and aesthetically pleasing way of enjoying your investment instead of letting it sit in a vault or safety deposit box.
Buying gold jewelry can be rewarding, but it requires some research and market savvy. Unlike bars or ingots, gold jewelry retains its value based not on just how much precious metal it contains, but other factors as well. Jewelry can be worth more (or less) based on its rarity, design, designer and other somewhat unpredictable factors.
A limited-edition, beautifully-crafted jewelry piece designed by an esteemed manufacturer or brand will warrant a higher price than one that’s mass produced. For instance, a 24-karat gold necklace from a famous designer such as Tiffany’s or Cartier can be worth many times more than that of gold jewelry (with similar gold content) produced by an unknown jeweler.
Spot Prices vs. Markups
Among all forms of physical gold, jewelry items have the highest markup. Most jewelry is marketed towards buyers looking for a beautiful new accessory, not a solid investment. Purchasing jewelry from a retailer almost guarantees a markup of 100% or more. That means, the retail price of a jewelry item may be twice the spot price for bullion of comparable gold content. Consider the additional amount you pay a ‘premium’ for the designers skills and effort.
When considering investing in gold, necklaces, rings or earrings will retain their value, but this may not make up for the staggering markups. In most cases, jewelry is not meant to be investment assets. Still, if you want to diversify your gold portfolio, look for great deals in gold jewelry at auctions, estate sales or specialized online vendors, and certainly not the mall!
It’s important to remember that, while jewelry is made to be worn, pure gold is not. As such, the two have different scales of measurement. Physical gold is measured in karats for jewelry and decimal purity for bullion. You may have heard of a 24-karat gold ring or a 0.9999 pure gold bar.
Don’t be mystified or confused by what a ‘karat’ is or whether 22-karat gold is purer than 0.9999 fine gold (hint: it’s not). The karat, also spelled carat, is simply a unit that measures how much pure gold is in a particular piece of jewelry. Gold assayers determine carats by how much pure gold there is, divided by how much the whole piece being considered weighs, and then multiply it by 24. A 10 gram ring with 8 grams of gold in it, for example, would be said to be a 19-karat ring. (19 karat = 24 x [8/10])
Another way of measuring purity that is already used extensively in gold bullion and coin assaying is called ‘millesimal fineness.’ Like karats, the name is scarier than the math: this type of measurement simply measures purity out of 1000. Our same 10 gram ring with 8 grams of gold would be said to have a fineness of 800. (800 fineness = 8/10.)
We always recommend investing in gold bullion due to the low over spot premiums, but if you are determined to add gold jewelry to your investment portfolio, consider purchasing pieces from renowned brands and only deal with reputable suppliers. In addition, it is important to note that 24-karat gold is very soft and can be damaged by mishandling. Don’t dent or ding your investment because of a few moments’ carelessness.