In these times of economic uncertainty, many people turn to precious metals as an investment. Gold jewelry is a good option, since it serves both as an investment and as an attractive fashion accessory. But, there are also pitfalls to investing in gold jewelry.
First, let’s look at the advantages to investing in gold jewelry.
The best reason to treat gold jewelry as an investment is that its value tends to stay stable over time, and will increase during times of economic stress. In general, when the stock market is going down, commodities like gold and silver are increasing in value. This provides a “hedge” to balance your overall investment portfolio.
If you are looking to invest a small amount, say $5,000 or less, a few pieces of gold jewelry will do about right. Since the price of gold per ounce is many times higher than silver, you can fit this amount in a safe-deposit box (or a shoe box in your basement, if you’re so inclined) rather than a full-sized safe.
Since every piece of jewelry is a work of art, the value of a piece of gold jewelry not only included the value of the metal inside, but also the artistic value of the piece. Like a painting or sculpture, a rare piece of gold jewelry can increase in value many times faster than the components it is made from.
Now, let’s look at the disadvantages:
Risk of Theft
A gold-based mutual fund or a stack of bullion in a safe-deposit box are as secure as the institutions entrusted with their care. A heavy gold necklace worn around your neck must be guarded carefully at all times.
Considering the events in the financial world in 2008 and 2009, however, it just might be safer to wear your investment around your neck then to trust it with a large investment firm!
This would be the flip side to the convenience listed above. If you need to invest a large amount of money, say $50,000 or more, keeping gold in your jewelry box might not be the best option. This much gold jewelry would require a fair bit of maintenance and care.
Slightly Less Liquidity
Since the value of a piece of jewelry comes in part from the artistic workmanship, you may have a little more trouble getting your money out of a piece of gold jewelry than a bar of pure gold. The value of the metal content is never negotiable, but the artistic value often is. However, as noted above, the artistic value is usually a positive asset.