Precious Metals Investments | Jewelry

Most investors got in touch with precious metals for the first time in form of gold jewelry,
regardless of whether it was a wedding ring, an amulet, a chain or bangles.

The jewelry industry claims 80 percent of the entire gold demand worldwide.
While the demand in industry- and developing countries was approximately equally high until the mid' 80's, it rose afterwards with increasing prosperity in developing- and emerging countries.
A process which is currently to be seen particularly in Asia.
In European jewelry industry, Italy occupies a dominating position. 20% of the jewelry production
remain in-country, 80% of the production get exported mainly to North America and Europe.

In industrial countries gold, silver or platinum can be manufactured to jewelry, but just in exceptional
cases be seen as a premium asset. On the one hand there is a strong dependence on fashion which leads to surcharges and price fluctuations and on the other hand, surcharges are extremely high in comparison to the material price because of the fabrication and the profit margin. However, the decisive point is that every piece of jewelry is more or less unique (similar to diamonds). The valuation of the material (e.g. how many karats the jewel consists of) can only be done by an expert.

When the investor sells jewelry he must be ready to accept harsh losses. At worst, purchasers just pay the material price and then melt down the jewel. This way about 1000 tons of gold are collected year in and year out all over the world. Additionally to that, an existing liquid market for jewels which guarantees a smooth purchase & selling, is missing. Bullion coins (for example the American Eagle) have a predefined size, an unchanged outward appearance, a high finess, are globally spread and known. Every bank, every coin dealer and gold smith accepts bullion coins, the trading margins between purchase & selling are approximately equal worldwide.

In the Arab countries and emerging countries, but especially in Asia, a symbolic value is assigned to the yellow metal. Gold jewelry was used as dowry when a couple married and given to them to back up their property, ever since. Low wages and a multitude of traders guarantee a significantly lower surcharge. Contrary to the industrial countries, demand is relatively elastic concerning the price. Demand grows with declinig gold prices and falls with increasing commodity prices.

Summary:

- not suited to serve as a premium asset
- high manufacturing costs and profit margins
- Buyback of jewelry only to the original material price
- Degree of finess can only be determined by an expert
- In the Middle East and in Asia jewelry is rated higher than in countries of the western world
- Please take account of the Disclaimer, as with any other kind of investment/asset !