Gold Jewellery - Adornment or Investment?

Written May 2024

The Gold Rush

The Gold Share Price is currently at an all-time high, with a record price of US$2,449 an ounce being achieved on 20 May 2024. Two years before that, gold traded at US$1,874 (May 2022) and fifty years ago an ounce of gold cost US$100.  Even Silver reached an eleven year high this month and Platinum has again come close to its Feb 2021 record high. 

Often seen as a steady and sensible investment, precious metals, and in particular gold, are not prone to big price swings and high volatility. In global climates of recession, inflation, war and uncertainty, many investors will be looking to diversify their portfolios, hedging their losses, by investing in gold. Ultimately gold is deemed to be a conservative long term investment with steady growth opportunities.

Can Anyone Buy Raw Gold?

Yes! Nowadays, gold bars are traded on the open market. Should you be interested in purchasing a pure gold bar, John Franich can help you with this investment purchase, just click here to book an appointment to discuss the process. 

However, why buy a gold bar when you could buy a beautiful piece of jewellery that you can actually wear and enjoy.

Gold Jewellery Trading

If you have ever travelled to the Middle East, in particular Dubai, you will no doubt have been taken to the Gold Souks. Gold Jewellery markets where gold chains are bought off the role, by length and sold by weight. In markets like these traditional investment banking is governed by Shariah Law (see footnotes), making investing in physical gold jewellery one of the best ways to save your money for a rainy day. These Gold Souks also buy gold jewellery from visitors in exchange for new jewellery, or cash at the going rate, meaning jewellery at the Souk is simply a form of currency. 

Key Considerations When Buying Gold Jewellery for Investment Purposes

When assessing gold jewellery as an investment, consider essential factors:

1. Purity: The purity of gold is measured in karats, which then correlates directly with its value. 24 karat gold is the purest form, but also the softer of the gold karats. 18k gold is a popular choice for a high value, slightly more affordable, but still strong. Gold chains may often be in a 9k gold due to the inherent strength.

2. Weight: Of course the more solid the piece the better, as once the karat has been established, the gold is traded in weight. So either more gold pieces or more solid gold pieces is the way to go.

2. Design and Craftsmanship: Intricate designs and superior craftsmanship elevate gold jewellery beyond its intrinsic metal content, potentially enhancing its value. However to recoup these cost you might take a look at auctions and jewellery dealers to ensure you get the return on the design investment as most gold traders will not factor in design and aesthetics.

3. Market Dynamics: like all commodities and investments the value of your gold jewellery will fluctuate with the USD market price for gold. Should you be looking to sell gold, then it is a good idea to watch the market prices to maximise your price.

So Should I Hide My Gold Under My Mattress?

As any good politician might say, the answer to that question is ‘yes, ….and no’. It is certainly true that in a post apocalyptic world where there are no banks and currencies no longer make sense, raw commodities such as gold, and jewellery could again become "currency". Even though we, here in New Zealand, don’t have the concerns that many of the world's emerging economies do, its not just the Doomsayers, QAnon-ers and Bunker Builders who are starting to look at their cash, their investments and their property values and wonder if physical gold, hidden under their mattress, may not be a better investment.

Indeed, anyone who has experienced living in a country, where there is a threat of economic bankruptcy, will be familiar with the idea that hiding gold under your mattress (or in your freezer), may be safer than putting it into a local bank, in a currency that could devalue overnight. Countries like Greece, Argentina, South Africa and Zimbabwe have long suffered major currency devaluations, strict foreign exchange controls and restricted access to their own cash, that buying up Kruger Rands was once the safe-haven for those who could afford to do so.

In 2022, jewellery consumption accounted for 44% of global gold demand, with major markets like India, China, and the United States driving consumption. Gold prices echo the fundamental principle of supply and demand, so the higher the demand for jewellery and electronic goods that utilise gold for their components, as well as the demand for gold as an investment will drive the price of gold upwards.

Financial analysts anticipate gold's continued upward surge over the next decade, amidst global economic turbulence, war and multiple recessions. So hedging your investments with gold jewellery stashed away for a rainy day, could be something to consider.

Note: we at John Franich do not recommend hiding gold under your mattress or in your freezer. Apparently these are the two most common hiding places, and also most often prone to “accidentally being tossed in the bin along with last year's frozen lasagne” or “eaten by the vacuum cleaner”.

What if I Decide to Sell My Gold? What’s The Best Way?

As times have become tougher, we too have seen numerous clients coming into our store looking to trade gold jewellery. Often these are broken fragments or heirloom pieces that are out of fashion.  Many choose to use the raw materials to create something new, and some use the credited value of the precious metals towards  purchasing a new piece.

This is absolutely an option and something we welcome at John Franich. We will also gladly support our customers should they wish to trade their gold and platinum in for cash. We can assess your pieces and get a quote for the current market value for you and handle the exchange with our suppliers. It is important to note that we will not be valuing your jewellery based on the design or history of the piece, but only on the karat and the weight.

We like to think of this as the oldest and most original form of recycling and upcycling. Should you be interested in selling your gold or platinum jewellery, please  book an appointment with us to evaluate your pieces.

In Conclusion

While gold jewellery undoubtedly possesses intrinsic value and investment potential, its role within an investment strategy should be carefully considered. Whether purchased for adornment, celebration, or wealth preservation, gold jewellery offers a timeless allure that transcends its monetary worth. 

Ultimately, the decision to invest in gold jewellery should align with your personal preferences, financial goals, and risk tolerance.

We at John Franich, prefer to look past the raw materials and rather marvel at the whole piece in its full glory. The beauty, the allure and the heartfelt intention behind each gift and the giver of the gift. Yes, jewellery has a price, but the value to the buyer and the wearer is often one that is simply priceless.

Sources:

1. Yahoo Finance
2. Reuters
3. Investopedia

*Shariah Law and BankingTwo fundamental principles of Islamic banking are the sharing of profit and loss and the prohibition of the collection and payment of interest by lenders and investors.

Gold investments must comply with Shariah principles, including physical ownership, immediate possession, fair pricing, and avoiding interest-based transactions.