Buying gold and silver jewelry new at retail price is never a good investment. Fine jewelry is a luxury good that has been been heavily marked up by retailers to the tune of at least 300%.
It’s like a car: The moment you leave the store, your piece of jewelry immediately loses roughly 75% of its purchase value, even if its packaging is unopened. Even then, retailers are very often reluctant to buy the item back and you’ll be lucky if they’ll pay you 25% of the original value in cash. So beyond their value as a wealth status symbol, what are the benefits of owning fine jewelry?
Again, we must travel back in time to the Great Depression — specifically, 1933. When President Franklin D. Rosevelt made it illegal to privately own gold bullion and coins, — purportedly to get the economy out of the depression— he made an exemption for the private ownership of personal gold jewelry.
It’s truly unthinkable in today’s world that an American president would send an ordinary citizen to jail for up to 10 years just for owning gold coins. Thankfully, in 1974, President Gerald Ford repealed FDR’s executive order and legalized gold bullion ownership once again.
While skeptics will say gold bullion will never be confiscated again — that such a move would be unconstitutional or held up in the courts for so long as to be useless — it’s still prudent to diversify some of your physical gold holdings into fine jewelry. You don’t need a lot, either — allocating about 10%-15% of your physical gold portfolio to jewelry should be sufficient.
The biggest benefit of gold and silver jewelry is portability. You have the ability to discreetly wear and transport a concentrated form of physical wealth from one continent to another. Many countries require you to declare at customs if you are, say, carrying a tube of American silver Eagle coins or an 1 troy ounce Pamp Suisse gold bar. This could lead you being held customs with no legal representation and no idea what the laws are, all for carrying a small amount of gold or silver — even within the legal limit — all because of overzealous customs officials. You not only risk the confiscation of your gold and silver coins, but you risked getting barred from entering the country again.
As for jewelry? As long as you’re wearing it or you have it in your luggage and can claim it’s your personal effects, you can easily cross international borders without causing a fuss.. Customs officials and immigration officers aren’t going to blink an eye, even if you’re wearing a 2 carat gold diamond ring with a matching 18K gold necklace.
Yes, there aren’t a whole lot of us for whom this is going to be a major concern. If you’re someone with dual citizenship or residency, or you’re considering immigrating to another country, this is a very good reason to consider gold and silver jewelry.
Yes, we said at the outset that gold and silver jewelry loses a lot of its value the moment you buy it. It doesn’t have to stay that way, though — and their value as family heirlooms may make them priceless.
First, the heirloom aspect. When I got my diamond engagement ring from my husband-to-be, I learned that it was his grandmother’s and that his mother had been saving it to give to him when he met the right girl. Just the fact that I was the right girl for the diamond made the value go up exponentially — not monetarily, of course, but as a piece of family history. Now it wasn’t just part of his family, of course — it was part of our family.
This goes for any piece of gold, silver or diamond jewelry, mind you It’s passed down through the generations — and you can’t put a price tag on a piece of family history that reminds you of a loved one.
Even if you aren’t the sentimental type, consider this: Yes, jewelry loses a fair chunk of its value at first. Over time, however, you’re going to see an increase in value for three reasons: Increase of the cost of metal, increase in the cost of gemstones and increase in demand for certain styles of vintage jewelry. On the first two, commodities like gold, silver and diamonds tend to increase in price — the first two more so than the last one, but all three will likely still increase in value due to the fact supply chains for them become more expensive over time. On the third count, keep in mind that once jewelry reaches a certain vintage, demand goes up in a major way, particularly since certain styles don’t get produced anymore.
Now, this also depends on what you bought and where you bought it. A Tiffany piece or something from an independent jewelry artist is going to see significant demand down the line. Something generic from Zales, not so much.
Yes, there are other forms of physical commodities that are going to appreciate in wealth. For instance, wine and artwork are often good investments, provided you know what to look for. However, keep in mind fine jewelry is the safest way to down physical wealth inasmuch as it’s virtually indestructible. Artwork or rare collectibles are very likely to suffer damage with the passing of time if you’re not especially careful. A careless visitor in your wine cellar and poof — there goes your bottle of 1982 Chateau Prieure Lichine. When this happens, they’re ostensibly worthless.
Meanwhile, damaged fine gold jewelry is still worth its metal weight as well as the value of the gemstones. It also also requires no special care or preservation apart from the occasional inexpensive professional cleaning.
There’s a reason why royalty, celebrities and other rich families have always used fine jewelry to preserve and pass down wealth to future generations. Even though inherited family heirloom valuables (which includes fine jewelry) are subjected to a hefty 28% capital gains tax, your grandchildren won’t actually have to pay any tax unless they sell the jewelry. Your children can inherit your entire gold and jewelry collection valued at $50,000 — and they won’t have have to pay the IRS a single cent in taxes.
Beneficiaries of paper commodities could only wish for that kind of arrangement. They can’t escape a huge inheritance tax bill on paper assets such as cash, bonds, stocks, 401(k), IRAs and real estate. If you want to reduce the amount of inheritance taxes your children have to pay, this is just smart tax planning.
There’s also the fact that fine jewelry is easy to give as a gift, at least within your own family. Want to give your adult son your diamond ring to propose to his beloved? You simply give it to him. Unlike, say, giving your son a car, there are no legal costs or time involved to draft up documents so that you can transfer the jewelry to your son. It doesn’t get more straightforward than giving and receiving jewelry between family members.
Now, as a giver, you have to worry about paying a gift tax. However, at least as of 2019’s IRS regulations, you only have to do so if the gift is valued above $15,000. Also, this $15,000 annual exclusion only applies per individual in your family. Has your daughter been longing for that pair of diamond earrings in your jewelry box? Your spouse can also give it to her without being taxed. Hence, you and your spouse can safely and easily transfer wealth up to $30,000 to your children without worrying about any legal paperwork or taxes.
Last but not least, let’s not forget: Gold and silver jewelry are shiny, pretty and luxurious personal adornments for you to wear and enjoy. An exquisite, beautifully-designed and well-crafted piece of gold, silver or diamond jewelry is a piece of art to be worn and admired at special events. Again, I am not advocating you should get into crippling debt and recklessly swipe your credit card at Tiffany’s. However, buying three or four pieces of fine gold and silver jewelry over your lifetime — provided, of course, you have the disposable income — is a good hedging and tax planning strategy. And keep in mind, you can often find much better deals from online jewelry retailers than those in malls. If you want to read further, click here.