Gold jewelry is a popular collectible item – and it’s also a popular investment option. Did you know that your beautiful gold baubles can actually be a great way to hedge against inflation? They are also a great way to diversify your investment portfolio, as the value of gold tends to hold steady in the face of poor stock market performance and economic uncertainty.

Wondering whether or not you should add gold jewelry to your investment portfolio? Read on to learn the advantages (and disadvantages) of investing in gold, tips for determining the value of gold jewelry, and other gold options that you could potentially invest in.

What are the advantages of investing in gold?

Owning physical gold is a great investment option for many reasons. Read on to learn just a few of the many reasons why you should buy gold as part of your investment portfolio.

Holds its value: Historically, physical gold has held its value. This quality makes it a great way to hedge against inflation. As a matter of fact, we tend to see rising gold prices whenever the cost of living increases. When the US dollar isn’t performing well, or even during times of economic or political uncertainty, gold tends to increase in value. Gold also tends to do well when the stock market isn’t performing. People are encouraged to purchase gold as protection whenever their local currency is shrinking in value.

Limited supply: The fact that gold is in limited supply has a huge impact on its value. Since 2000, the production of new gold from mines has been declining, and it can take a gold mining company between 5-10 years to bring a new mine into production. This leads to scarcity, which makes gold all the more valuable.

Increasing demand: The recent increase in wealth of emerging market economies has greatly increased the demand for gold. In the country of China, gold bars are a traditional form of saving, so gold is always in demand.

In the country of India, the second largest consumer of gold in the world, gold is in demand for making jewelry, as well as for other purposes. The wedding season in India takes place in October, and is a time of year when the demand for gold increases. Gold is also a popular choice among investors, as more people are looking to invest in commodities such as gold.

Diversification of your portfolio: Diversifying your investment portfolio means investing in different options that are not correlated to each other. Gold typically has had a negative correlation to the stock market, as well as to other financial assets.

Tangible asset: Unlike many traditional investments, physical gold is a tangible asset that can be held in your hand and kept in your possession. Physical gold is considered a more stable investment than gold stocks. Gold stocks function similar to the stock market. Also known as paper gold, gold stocks are when you invest in a company that has connections to gold, such as a gold mining company. They tend to be safer than the traditional stock market, but again, they are not considered as stable as physical gold.

Are there Risks in Gold as Investment?

As with any investment, gold has its risks. Read on to learn some of the potential pitfalls of investing in gold.

Lack of long-term appreciation

Although gold may sometimes outperform other assets, the value may not appreciate as much in the long term. Putting too much money into this asset could prevent long-term gains, especially if you are trying to save up money for retirement. The S&P 500 index has climbed much higher than gold over a five-year period.

Counterfeiting

If you are looking to buy physical gold, there is always the possibility of counterfeiting. You’ll want to make sure that you are purchasing gold from a reputable seller. When in doubt, have an expert examine the gold you plan to purchase to ensure that it is the real deal.

Storage & Insurance Costs

With physical gold, there are some additional costs that you may incur. First, you’ll need somewhere to store the gold. Gold takes up space! Depending on how much you have, you may be able to store it in a safe in your home, or in a separate secure storage facility.

Another cost you will incur is insuring your physical gold. There is always the possibility of a break-in resulting in the theft of your gold. You can protect yourself from this risk by purchasing insurance coverage.

How to Evaluate Gold Jewelry?

When purchasing gold jewelry for investment purposes, it’s important to be able to evaluate the quality of the jewelry to determine the value. Here are some factors to consider:

Purity

Look for stamps on your jewelry that indicate your gold’s purity by the karats. 24 karat gold is considered pure gold. 18 karat gold contains 75% gold and 14 karat gold contains 58.3% gold.

Weight

Once you determine the purity of your gold jewelry, you can weigh your gold jewelry on a scale and calculate its value based on weight.

Workmanship

The quality of the workmanship by the marker of your gold jewelry will impact the value of the piece. Unique or intricate jewelry designs can help raise the value of the piece. Be sure to invest in pieces by makers known for their quality work!

Brand Reputation

If the gold jewelry comes from a well-known brand, it may be worth a bit more than from a lesser-known brand.

Storing and protecting your gold jewelry

When investing in a physical asset such as gold jewelry, it’s important to take the proper precautions to protect it. Here are some tips for protecting your precious investment:

Avoid extreme temperatures and humidity: Jewelry should be stored at room temperature and kept out of direct sunlight. It’s also important that the jewelry is stored in low humidity – this will prevent tarnishing and discoloration.

Choose a safe location: You’ll want to store your gold jewelry in a secure location that will reduce the risk of theft. A safe deposit box or home safe will provide an extra layer of protection.

Get insurance: Finally, it’s important to make sure that your fine gold jewelry is properly insured, which will protect you in the event of loss or damage.

Alternatives to Gold Jewelry Investing

There are other types of gold you can invest in besides jewelry. These include gold coins, gold bars, exchange-traded funds (ETFs), mining stocks, and gold futures. Read on to learn more about these alternative forms of investing in gold.

Gold coins: Gold coins are considered a low-risk investment option, and they are relatively easy to buy. You can purchase historical coins, collectible coins, rare coins, or gold coins that are legal tender and issued by the government.

Gold bars: If you choose to invest in gold bars, it’s important to buy bars that have the name of the manufacturer, the weight, and the purity stamped on them. Royal Canadian Mint, Perth Mint, and Valcambi are popular mints that create gold bars.

Exchange-traded funds (ETFs): Rather than purchasing physical gold, you can choose to invest in an ETF. A gold ETF allows investors to expose their portfolio to gold without having to purchase, store, or resell it. Some ETFs will track the price of gold directly, but others invest in a gold mining company.

Gold futures: According to Schwab.com, “gold futures are standardized, exchange-traded contracts in which the contract buyer agrees to take delivery, from the seller, a specific quantity of gold at a predetermined price on a future delivery date.” Gold futures allow companies the opportunity to hedge their gold price risk on the expected future purchase or sale of gold. They are often bought as an anti-inflation hedge.

FAQs

What factors affect the price of gold jewelry?

The value of gold jewelry is first determined by its purity and weight. 24K gold is considered pure gold, while other karat options only contain a percentage of gold. Once you know the purity level, you can weigh gold to help determine its value. When it comes to jewelry, the workmanship and brand can also have an impact on value.

Is investing in gold a good idea right now?

Investing in gold is a great way to diversify your portfolio and add some stability and protection against inflation. It’s important that you invest in other options besides gold, as gold doesn’t gain as much value over the long haul as other investment options.

Sources

https://www.investopedia.com/articles/basics/08/invest-in-gold.asp

https://www.investopedia.com/articles/basics/08/reasons-to-own-gold.asp

https://www.cbsnews.com/news/investing-gold-pros-cons/

https://www.thespruce.com/how-to-store-fine-jewelry-2043583

https://www.aupreciousmetals.com/blog/how-buying-gold-coins-is-a-good-investment

https://www.investopedia.com/articles/investing/072316/how-do-you-purchase-physical-gold-bars.asp

https://www.nerdwallet.com/article/investing/best-gold-etfs