Diamonds And Gold As An Investment: Worth It?

Jeremy BiberdorfBy: Jeremy Biberdorf

September 19, 2017September 19, 2017

Diamonds And Gold As An Investment

We teach our children the value of gold and jewels from a very young age. Whether it’s letting them dress up in mom’s pearls, or reading them fairy tales about dragons and treasure, everyone universally agrees that precious metals are, well, precious. However, given the current market conditions, are diamonds are strong investment option? Is now the time to take advantage of the value of your old engagement ring or wedding band, or should you hold on to your gems?

The Market for Gems

Any investment decision should be made with as much information as possible. An understanding of the market for gems and jewelry will allow you to make an educated decision about how this class of investments fits in to your personal financial situation. The market for gems has historically been volatile in the wake of the market crash of 2008; however, it has become much more stable in recent years. Demand is returning to the markets as investors look for value. Low prices could signify a buying opportunity for savvy investors. Additionally, those with gems and jewelry looking to liquidate excess assets may find an opportunity as the US Diamond Ring Engagement Market is expected to grow over the next four years.

Positive improvements in the US Diamond Ring Engagement Market are expected for multiple reasons:

  • per-capita GDP growth
  • an aging population
  • increasing demand for luxury goods

However, all markets face risk. Any investor should be certain to determine the appropriateness of any investment for his or her individual portfolio before finalizing a decision.

Gold and Other Investment Options

Other investment options include gold and precious metals. Gold was an extremely popular investment following the most recent recession in 2008, and prices soared to record highs. Prices have cooled considerably since then but are expected to remain relatively stable in the near future. Increasing geopolitical risks could drive the price for many commodities up as investors flee to safety in periods of uncertainty. Purchasing gold and jewelry may be a viable option for investors looking for a safe place to store value, while still having an opportunity to see a return on their investments should higher prices in the markets materialize.

Diamonds And Gold Investment

Benefits of Investing in Jewelry

Jewelry, particularly gems and rings, are generally considered safe from inflation. When economic conditions are uncertain, many other investments see wild fluctuations in valuation and returns. Conversely, diamonds and gold hold their value. Moreover, diamonds and gold fall are commodities, meaning they are physical investments one can hold and transport.

Perhaps the most crucial benefit of investing in gems and jewelry, though, is the shield it provides against many unfavorable conditions in the market. Precious gems and metals protect against:

Inflation– As the general cost of living increases, so too does the price of gold. Historically, this correlation is greater than one, meaning that gold prices can provide superior returns even in years when other investments underperform.

Deflation– because people generally recognize that gold and jewels possess intrinsic value, they maintain their purchasing power even in periods of slow economic activity.

Volatility– Current market conditions for stocks and bonds are characterized by wild swings in volatility. Gold and jewelry don’t experience the same polar spikes as other asset classes and can typically be relied on to preserve wealth for extended periods of time.

So What Now?

So I’ve convinced you that it may be a good idea to locate that old, unwanted engagement ring or diamond necklace from years ago and examine your investment opportunities. How should you go about determining the best way to differentiate the good options from the bad?

The market for diamonds and jewelry is, as can be expected, highly specialized and should be approached with a great deal of caution. You should be prepared to do a considerable amount of homework. Investing in jewelry means that one must understand the dynamics behind what makes a particular piece of jewelry valuable. Look for pieces that are both fashionable and durable. Smaller rings and bracelets will naturally be less valuable than larger necklaces and watches, keeping in mind that you must also account for quality. Investors seeking value should look for items that are at a low markup from the price of the derivative precious metal. For example, if a particular wedding band contains 1/10th an ounce of gold, and an ounce of gold is valued at $2000, a smart investor would want to pay the least amount over $200 possible for the band.

Other investment options include diamond rings, earrings, necklaces, and coins. Specific trends in markets may be identified through closer research. For example, rose gold has been growing popularity as an option for wedding bands with the younger generations. However, many buyers believe this may just be a fashion trend and caution that yellow gold may be better for risk averse investors.

Diamonds And Gold Investing

A final option may be whether or not one should pawn their jewelry. Selling at a pawn shop may be a good way to liquidate extra gold and gems quickly, but you should approach selling to a pawn shop as you would any other financial decision: with careful consideration. A pawn shop may be less likely to offer a fair price for each piece, so be sure to know the value of your items before going in.

When investing in gems and precious metals in any form, be sure not to let your expectations run away from you. Stay grounded in reality and ensure that you make decisions that allow you to reach your investment goals.

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Jeremy Biberdorf
Jeremy Biberdorf

About the Author:

Jeremy Biberdorf is the founder of Modest Money. He's a father of 2 beautiful girls, a dog owner, a long-time online entrepreneur and an investing enthusiast.

2 thoughts on “Diamonds And Gold As An Investment: Worth It?”

  1. Lily @ The Frugal Gene

    My husband and I don’t have a wedding ring because it was so difficult to navigate “what is a good deal” in the gems industry. We decided to just kick back and watch netflix. But our families have brought up that we “need a ring to be married” so alas, a ring may be force upon us. If it is, I want the smartest deal an investor can make! Thanks for writing this!

  2. In our country we mostly deal with gold everyone wears gold as well as they invest/trade/mortgage gold in bank for money. basically people invest the gold for future.

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