Difficult access to investment gold: will this affect the investment jewelry market?

Author of the entry: Mennica Skarbowa
Date of entry: April 15, 2020

Everyone who wanted to secure their savings by exchanging them for gold in connection with the current coronavirus situation has recently been in for a big surprise. For some time now, it has been very difficult to buy gold bars or coins. Will the same thing happen to jewelry soon? There has already been a significant increase in sales of thick gold chains, which are the most advantageous form of jewelry in terms of investment.

NO GOLD IN REFINERIES AND MINT

As we can read on Bankier.pl (Bankier.pl "Want to buy physical gold? You're too late" Krzysztof Kolany 03/26/2020), some time ago, investment gold quickly disappeared from the shelves and access to it became difficult. There are many people willing to buy, but there are not enough sellers, hence the lack of bars on the secondary market.

Could the same thing happen to jewelry in a moment?

WHY INVESTORS BUY JEWELRY

When investment gold becomes scarce, investors look for alternatives. One option is to buy gold jewelry, especially relatively simple jewelry, which is inexpensive to produce. Another alternative is to buy jewelry with large, valuable, high-quality stones. The price of such jewelry best reflects the price of the materials used (gold and precious stones) and thus maximizes the profit on sale.

WHAT KIND OF JEWELRY DO INVESTORS BUY?

Investors who purchase jewelry as a substitute for investment gold usually adopt one of two strategies: purchasing jewelry from the secondary market or purchasing simple jewelry with low production costs.

Some investors decide to purchase jewelry from the secondary market. Purchasing from the secondary market involves much lower investment costs. When buying used jewelry , we do not pay for the brand, nor do we incur the costs of commissions for intermediaries who are part of the sales chain for new jewelry. The price of jewelry on the secondary market therefore reflects the price of gold much better than the price of new jewelry.

The second option is to purchase high-karat jewelry with a simple design. When purchasing jewelry as a substitute for gold bars, it is not worth investing in intricate decorations, small jewelry, and low-karat jewelry. The more complex the design, the higher the manufacturing costs and the higher the price. It is better to choose something simple, such as a chain. Chains are machine-made, which significantly reduces production costs. It is also not worth investing in small and cheap jewelry, as it contains little gold. Thus, sales costs and intermediary margins have a relatively large impact on the price. When buying jewelry for investment purposes , it is therefore important to consider how much the price reflects the actual value of the jewelry and to what extent we are paying for the brand. Unfortunately, many well-known brands offer jewelry at prices that far exceed the value of the materials used in its production. Therefore, when buying jewelry, we always check the gold fineness and weight of the product.

Another option is to purchase jewelry with precious stones. In this case, however, we are not talking about investing in gold but in precious stones, as they will have the decisive value.

WHAT IS THE WEIGHT AND FINE OF GOLD?

The fineness indicates the pure gold content in the product. The finenesses most commonly used in jewelry are 750, which means 75% gold in the alloy, 585, which means 58.5% gold, 375, which means 37.5% gold, and 333, which means 33.3% gold. The fineness should be reflected in the price, i.e. if we have two identical pieces of jewelry, one made of 333 gold and the other of 585 gold, the first will contain almost twice less gold than the second, so its price should be significantly lower.

The second important criterion when buying jewelry for investment purposes is weight. If we know the weight and fineness, we know how much gold the product actually contains and we can compare the prices of similar jewelry in several stores. The easiest way to do this is online. Unfortunately, many brands do not specify the weight of their products, which makes it difficult to compare them with competitors' offers without having to ask by email or phone.

Both in our store and in our partner store Jubiler.pl, we always provide the weight and fineness of gold.

IS GOLD JEWELRY A GOOD INVESTMENT?

Gold is always a good investment, as it is the safest place to invest capital in the event of war, financial crisis, or epidemic. Of course, it is more advantageous in terms of investment to buy gold in bars or coins. However, when gold investments are difficult to obtain, as is currently the case, purchasing high-purity and high-weight jewelry is a good idea. Jewelry also has one advantage over bars and coins – it has practical value. It is therefore not only an investment, but also a beautiful accessory. It does not have to lie locked in a safe for years, but can be used throughout the entire investment period. Moreover, if we carry it on us across the border, we can easily transport high-value jewelry. However, in the case of gold bars, we should declare the amount of gold we are carrying if we are traveling outside the Schengen area.

Should we be concerned that there will soon be a shortage of jewelry on the market? This is unlikely to happen, but difficulties in accessing gold may significantly affect prices. Price increases may also lead to shortages. A significant proportion of jewelry is produced in Italy, India, and China. It is very likely that as a result of recent turmoil, including production stoppages, border controls, transport restrictions, and restrictions imposed by countries, there will be serious difficulties with jewelry imports, which will cause prices to rise.