Stupid to invest in gold jewelry

It is plain stupidity to invest in gold jewelry.

In fact, buying gold jewelries should not even be termed as an investment.

It is a sheer waste of money if you do not wear the jewelries, and just keep them in the safe.

If you want to invest in gold to hedge against inflation risk or against the declining value of US dollar, you can buy gold bars or gold bullion coins.

Never waste your money in gold jewelry.

Why is it sheer stupidity?

1.  Very high premium

You definitely pay a very high premium for the jewelries than for gold bars.

It is true that bullion bars do not look nice, and nobody can wear a gold coin or a gold bar, the fact is that the premium over spot rate of gold is much lower.

You have to pay for the mintage, the shipping, the insurance, the rental of the goldsmith shop, the paperwork involves in the purchase for buying any form of gold.

When it comes to jewelries, you have to pay extra for the workmanship.

2.  Not pure gold

Gold jewelry is never made of pure gold.

You cannot see the word 0.999 purity stamped to the jewelry.

Pure gold is actually very soft.

Once you drop the gold coin or gold bar, you will cause a dent.

However, gold jewelry is mixed with other hard metals to maintain the shape.

That is you will find mostly the jewelries of 0.916 purity.

3.  Lack of resale market

How do you liquidate the gold jewelry when you need money?

If you sell back to the goldsmith shop, you will not even get cash for it.

You must buy another piece of jewelry.

If you sell at pawnshop, you can get cash, but the rate is unfavorable.

However, when it comes to pure gold bar, and gold coin, you will find that selling to private investors at a premium is possible.

As long as you can show the original receipt, you have no problem selling them.

You can sell to the bank, the pawn shop, the private investors, online shops, or the shop selling you the gold bar in the first place.

You can also liquidate the asset in another country.

You do not have to worry that the shape of the gold jewelry is offensive to the people in other country.

4.  Selling price

It is easier to determine the selling price of gold bars and gold bullion coins, since these are pure gold, and you can track the current gold price.

Technically there is just one spot gold price in the world.

You can check Comex spot market for the current spot price.

As a result, the selling price is pretty transparent.  Most buyers expect to pay a standard premium over spot.

Over in Singapore, the premium over spot for gold bar is 20%, because we have a sale tax of 7%.

If you are talking about gold jewelry, it is hard to determine the selling price.  You cannot just base on the gold content in the jewelries.

If you are selling to a private buyer, you can get a slightly higher than spot rate if the buyer likes the design.

If she does not like the design, you may not even get to sell it at gold spot rate.

That is a very miserable price, since you are likely paying a very high premium for the workmanship.

That is why never treat gold jewelry as an investment.

It is an expenditure, and not an investment.

If you really want to invest in gold, you can open gold saving account, buy though gold ETF, buy physical gold bar or coin, but never buy gold jewelry.