As jewelry is associated with luxury, made of precious metals and stones, and usually involves workmanship of the highest class, many assume it to be a great asset for investing.
This idea is further perpetuated by stories and movies, depicting men and women selling their precious jewelry and, sometimes, even the wedding rings to get out of hardships, to feed the family or to educate their children. All of this has created the belief that jewelry is a solid investment and a way to store our money.
At the same time, many of those who have ever tried to sell or pledge their jewelry discovered that it rarely sells even for the same price paid when buying. Whatever are our bargaining skills, getting back even close to the initial cost is a hard task, and here is why.
Seller’s Mark Up
Even if you buy used jewelry at auctions, you pay auctioneer’s commission amounting to 10-30% not to say about new items from brick n’ mortar stores where you end up with roughly 100% mark-up. With the development of jewelry sales online, the mark-ups have somewhat decreased, as online merchants can cut costs, keeping inventory close to zero. Nevertheless, as people do not buy jewelry on a daily basis, which leads to slow turnover for the sellers, nearly half of the price you pay would be the sellers’ compensation.
Cost of Designing and Workmanship
Expecting profit from investing in jewelry because it is made of precious metals and stones is somewhat similar to investing in a Rolls-Royce in hopes that the price of steel and leather will grow up.
It takes tradition, know-how, and jewelers’ skills to produce a work-of-art out of a piece of silver, gold, or platinum be it a simple ring or a most exquisite bracelet or an ornament. Naturally, all of it goes with a price, which you will never get back if you pawn or sell the jewelry for the price of gold or stones it is made from.
When some limited edition of jewelry from Cartier or Tiffany or another top brand of the highest class become vintage, they may resell for a much higher value than the original price and thus make an excellent investment. At the same time, in the case of more mainstream items, it will be hard to resell even for the initial price. Buying branded jewelry even from the best brands means that the price of the items includes hefty mark-up paid for the brand name, and it can take decades to appreciate.
While gold bullions can be bought VAT-free, all new jewelry is subject to value-added tax in most markets, except United Arab Emirates, Turkey, and some other countries with very low or zero VAT rates for jewelry. Other taxes may apply as well depending on the jurisdiction. Selling pre-owned jewelry for weight at the price of gold in bullions will bring immediate losses at the rate of VAT tax.
As we have seen, the price of new jewelry includes much more than the cost of precious metal and stones it is made from. Except for exclusive items from the top brands, reselling pre-owned jewelry would mean trading it for weight at 50-100% loss even after a considerable period of time.
Investing in jewelry can be a great way to commemorate an achievement, mark a unique period in your life, or show how special a person is for you. But if you look at jewelry as a way to keep your money and hopefully increase it with time, the safest options might be buying gold bullions, coins, loose precious stones, or only exquisite pieces from the top jewelry houses.