investing in gold jewelry

Investing in gold jewelry might seem like a safe bet, but it has its pros and cons that you should be aware of.

Outside the U.S. and Europe, investing in gold jewelry is a popular method of stocking up on everyone’s favorite precious metal — which would seem to recommend the practice. However, it presents some difficulties for the Western investor, so let’s take a closer look at the prospect.

The Pros

Gold jewelry does have its positive points from an investment perspective, not least the portability aspect. Even if you don’t care to keep it close at hand or use it as personal decoration, you can easily move it from here to there at will, at least in small quantities.

Plus, gold is quite the stable investment, and has excellent potential to increase in value, no matter the form. Gold jewelry is also easy to acquire. You can go into any jewelry store or pawn shop and purchase it with ease. Most will also happily take it off your hands when you need to sell it.

That’s about it for the pros. Let’s look at the cons.

Hey, Wait a Minute!

Right about now you’re probably wondering, “If gold jewelry doesn’t have much to recommend it, then why do people in other countries invest in it so heavily?”

There’s a simple reason for that: often, it’s the only way they can invest in gold at all. Until recently, for example, many Asian governments did not allow their citizens to own gold bullion, which is a much more stable investment.

If you think that’s odd, don’t forget that our own Executive Order 6102 and the Gold Reserve Act criminalized the private ownership of gold bullion here in the States from 1933 to 1975. During that period, the only way for Americans to own substantial amounts of gold was to purchase jewelry.

Moving Right Along…

Probably the best reason not to invest in gold jewelry is the premium cost. Jewelry is decorative artwork, which demands a higher price than the value of the metal alone. Beauty is in the eye of the beholder, so such values may shift over time. You can’t tell for sure whether a piece will hold its artistic worth.

Bullion, on the other hand, is deliberately made to be non-collectible, though it does tend to be beautiful, and many numismatists (and the U.S. Mint itself, really) have partly abrogated that non-collectability in the way they present it.

Most bullion is also, by intent, easily storable. Bars or coins are much easier to stack than irregularly-shaped art pieces; plus, they don’t get tangled or snarled. Furthermore, scratches, dings, and other damage don’t detract from the value of bullion, as they do with jewelry.

The Selling Issue

The premium for buying gold jewelry may be high, but the premium when you sell, regrettably, is not. Just try to sell that ring to a jewelry store or pawn shop, and they’ll offer you a fraction of what it’s worth — and not a large fraction, either.

Worse, legit dealers prefer bullion, which is either of guaranteed purity and content, or easy to assay. Jewelry is neither. While you can assay it, it costs money, and it’s a pain to test a piece at a time — and destructive, too, which hurts the jewelry’s artistic value.

As for karat marks, they’re useless. Anyone can buy a karat stamp. I’ve seen 14K stamps on brass objects, placed there to convince suckers they’re gold — despite the verdigris. (Remember, gold doesn’t corrode).

The Bottom Line

Let me be blunt: for now, forget about jewelry as anything other than decoration. Why bother investing in gold jewelry, at a time when bullion is cheaper and so much safer?