Gold jewelry has been a popular way of preserving family wealth through inheritance over the ages. Nowadays, it has mostly been forgotten, except for by a select few who still hold on to their gold valuables. But how about those of you who don’t own any gold jewelry yet? Would it be a wise investment to make?
Buying gold jewelry is not an investment. Gold is a nonproductive asset and does not produce any income or dividends for its owners. Thus, it can only be classified as a speculative asset.
In this article, we will look at whether gold jewelry is actually an asset. If gold jewelry goes up in value over time. If owning gold jewelry is actually a good investment, how about golden chains? And finally, I’ll also highlight the pros and cons of buying gold jewelry as an investment.
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Is gold jewelry an asset?
First, let’s define what an asset actually is. Generally, an asset is considered something that increases in value over time or at least does not lose its value. A typical example of an asset would be real estate or the house you own. A typical counterexample would be a car that loses its value over time and can be therefore considered a liability.
Another way of defining an asset would be the way Robert Kiyosaki defines assets. According to this definition, an asset is an investment asset if it produces income.
Thus, gold jewelry can be considered an asset according to the first definition. However, since it does not produce any income or cash flow, it does not fit the definition of an income-producing investment asset.
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Does gold jewelry go up in value?
The value and price of gold jewelry are, of course, tightly linked to the price of gold itself. This means that if gold goes up in value, gold jewelry will also go up in value. There may be some exceptions to this rule, i.e. in the case of very rare or antique gold jewelry items, but for all intents and purposes, the value of gold, jewelry, and gold will be highly correlated.
If we look at the price of gold and the value it has accrued over time, a good place to start looking is in 1971 when Nixon took the United States off the gold standard. From 1971. Up until today, gold has gone up in value in dollar terms, around 10.69% per year on average.
This means that also gold jewelry has gone up in value by roughly 10% per year.
Is having gold jewelry a good investment?
As I mentioned earlier, buying and owning gold jewelry is not really an investment, but a speculative asset. It only makes sense to hold on to gold jewelry as a means of protecting against inflation or securing your asset and cash in precious metal to protect against an economic collapse or a government default on debt, which would lead to the collapse of the currency as measured against the US dollar.
Gold jewelry has been a good place to put your money as it has yielded upwards of 10% return per year.
Are gold chains a good investment?
Everything that we have discussed so far with regards to gold jewelry can be also said of gold chains that have a high degree of gold purity and will be tightly linked to the price of gold as well, depending on the type of gold chain that you own.
The resale value might increase or decrease even more. The main problem with owning and investing in a gold jewelry item such as a gold chain is that in order to make a profit, you have to find a willing buyer at a higher price point.
If the demand for gold and gold chains should decrease dramatically over the coming years and decades, your gold jewelry and gold chains might lose significantly in value.
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Pros & Cons of investing in gold jewelry
Let’s look at some of the pros and cons and start with the potential benefits of owning gold jewelry as an asset that increases in value over time.
The Pros
Gold jewelry has long been used as a transgenerational means of building wealth. It is untraceable and serves as a way of transferring assets from one generation to another through the means of inheritance without too many tax implications.
Another valuable function that gold jewelry can fulfill is that of the ultimate protection against the collapse of financial markets, the collapse of the government and its fiat currency, and the total collapse of civilization.
The Cons
However, in total, there are significantly more downsides to investing in gold jewelry. One of the main cons is that gold assets and gold jewelry do not produce any kind of return on their own to invest.
This means that the only way to make a profit with gold jewelry is to sell this jewelry to the next buyer at a higher price. Another negative of buying and owning gold jewelry as an investment is that it is illiquid and costly to secure and store. If we compare this to an investment in a stock market ETF, we notice that the ETF is easily stored and tradable and produces income in the form of dividends along the way.
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Conclusion
Conclusively, if you know what you’re doing and you realize that buying gold jewelry is actually not an investment but simply presents an ultimate barrier against total financial collapse or can be traded as a speculative asset. In that case, making an investment in gold jewelry might be a wise choice.
However, it is always important to keep this distinction in mind and be aware of whether you are investing or speculating.
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