I am constantly stopped by my friends and clients with the same question: "What do you think gold is going to do?". Referring the value of gold, they are curious if investing in this commodity is a wise decision. We even had an article published in our local newspaper.
I regularly (quite possibly religiously) follow the prices of precious metals. In fact, I have a program installed on my desktop called "KCast" from Kitco (a leader in spot metal prices) which updates the current price of precious metals every 5 minutes. It can be entertaining to see it jump around as it has the last several months.
Rarely is jewelry an investment. I know this may sound contrary to your local salesperson's spiel, but it is true. Just like a car, jewelry looses value the moment it leaves the retail store. This is simply because, at retail, a consumer pays for everything that created that sale. Advertisements, inventory, fancy showcases and jewelry salespeople are just a few factors that affect the price of your jewelry.
Gold and precious metals have an independent worth. You cant melt a painting down and sell it, nor can you send a website off to a refinery. Precious metals, however, can be. Broadly speaking gold jewelry has about a 250% mark-up at the retail market level. This means that a $100 gold chain, bought by a jeweler at wholesale will be sold to the public for $250. This chain probably only contains $50 in gold value- what a "melt or scrap value" is. So, for your $250 investment, you generate less then $50.00- if your clever. A pawn shop will give you, generally speaking, only 60% to 80% of scrap value. Do yourself a favor and send your scrap gold to a refinery yourself. Or better yet, have a professional appraiser broker it for you so you don't get ripped off.
So what IS a good gold investment? Simply buying gold or precious metal at fair market value when prices are low and selling at fair market value when prices are high. Simple enough, right?
Lets take a look at what gold has done in the last eight years. In early 2000, gold was selling for about $285/ounce, equivalent to $350.36/ounce in 2008. Today, gold is selling around $950/ounce. This is nearly a 370% gain in investment.
There was another time period where precious metals skyrocketed. In 1980 our country faced a similar economic recession, and gold prices shot higher then they are today. At the peak of that jump, in January of 1980, gold was selling for the equivalent of $2185 today. Gold would have to more then double to meet this high value.
Gold seems to have a unique factor of staying valuable when other commodities are loosing value. If you truely want a "solid gold" investment, one should purchase when our economy is well off, and sell when the economy is doing poorly.
I contacted some professionals from around the US on this subject, here is what they said:
“Jewelers are notorious for saving filings, that is- tiny bits and pieces of gold left over from manufacturing and repair. A jeweler can accumulate several pounds of gold over a lifetime of service in the jewelry industry. This is how many traditional jewelers retire. Because of the huge spike in precious metals, jewelers across the nation have been recently granted the privilege of early retirement.”
David Wolf, GG, ASA
Master Gemologist Appraiser
New York, NY
“We have had, for the past five months, jewelers around the corner of our building waiting to have their gold refined. At this time last year, when jewelers bought their inventory, they priced it out to what melt value is today. That means every gold retailer basically sold their entire inventory in a brief six months.”
"Dave"
Gold Refiner
Philadelphia, PA
Thanks for reading! Feel free to shoot me any questions you may have regarding this topic or the jewelry industry.
-Kennon
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