Since Russia’s invasion of Ukraine, many gold dealers around the world have seen their sales going up to the sky, as savers and investors rushed back to gold, the safe-haven asset in times of wars and geopolitical crises.
Growing investor interest pushed the price of gold above to the record it reached during the Covid pandemic, and made many of us wonder if gold might be a good investment in 2022.
Gold is one of the earliest traded assets, existing long before stock markets. Long time considered as a sign of divine power, gold was worn by kings and pharaohs for thousands of years, to demonstrate their strength and status. Probably due to this historical association of gold with the world’s most powerful leaders, even today, having gold jewelry, gold iPhone or gold Rolex watch, is a symbol of status and financial wealth. Stars red carpet look can’t be perfect without the bling of handcrafted necklaces and big sparkling rocks weighing hundreds of carats.
While it’s evident that we love to wear gold jewelleries, can gold be more than just a fashion statement, and become an investment strategy?
In the financial world, as a non-renewable resource, gold is rated as a Class A investment with many of the world’s central banks, and considered the third safest investment after stocks and bonds, as the value only grows with time. With inflation increasing all around the world since last year already, gold still seems to retain its value over time, even when the stock market is fluctuating. Recently, when the war in Ukraine erupted, prices on the stock market and crypto currencies have tumbled, while traditional safe-haven assets like gold and precious metals have gone up, as investors preferred to reallocate their money from riskier assets.
This leads many people to include gold jewelry in their inheritances and retirement portfolios, especially in traditional Eastern countries such as China and India where families cumulate an extensive gold jewellery heirloom collection, which can also work as an emergency asset during uncertain times (with often highly fluctuating local currencies).
When it comes to investing in gold jewelry, it’s important to keep in mind, that it works like fine art pieces, meaning that the initial cost of the product is often much higher than its “material” value. This difference comes from the craftwork put into creation of the jewelry, just like the brand value and name which also plays a substantial role in the final price. Like other art as paintings for example, price can vary based on many aspects, therefore it can take a while for a piece to become financially profitable.
Some of the advantages of buying gold jewelry as an investment are:
1. Recession and Inflation proof: gold is a scarce asset that has maintained its value over time and has proven its worth to act as an insurance policy during adverse economic events. Gold jewelry is less susceptible to short-term market changes and holds its value over time much better than most of the savings account. Indeed gold often moves higher when economic conditions worsen and inflation concerns increase. Since the amount of gold on Earth is limited, the value is guaranteed to increase over time.
2. You Can Bling with it: while your investment bonds might be a great value, you can’t wear them for a lovely gala dinner. As gold jewelry is designed to be worn and enjoyed, you can take advantage on a daily basis, and savour your investment while wearing it.
3. Easy to Liquidate: gold jewelry gives you an untraceable, private way to keep extra cash, which is easily sell in case of personal emergencies.
Some of the disadvantages of gold jewelry as an investment are:
While investing in gold is an excellent way to diversify a portfolio, jewelry is not the most efficient and quick way to gain return on your investments. For these reasons, many financial experts recommend capping your investment jewelry portfolio at 10 percent, and keep in mind the following points:
1. Safe storage: if you start to have a nice jewelry collections, you would want to protect it with a wall safe or safety deposit box.
2. Lack of regular income: Unlike a rental property or a saving account, gold jewelry doesn’t provide regular income. It might give profit only when it’s sold.
3. Sales Difficulty: if you would like to make quick profit on it and sell above what you initially paid for, it’s rather complicated. Finding the right buyer can take time. Like with fine art, brand evolution and personal aesthetic can influence the jewelry that you’re selling.
How to Buy Gold Jewelry
Now that you see that investing in gold comes with several benefits, how do you buy gold jewelry properly?
1. Get your jewelleries from a reputable source, being sure that it comes with certificate.
2. 14-18 carat gold jewelry are purer and more valuable as they contain more gold.
3. Timeless and classic design will remain evergreen and last through trends.
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