Is Gold Jewelry a Good Investment Option?

Alt text: Is Gold Jewelry a Good Investment?

Gold jewelry has been a favorite investment option for centuries. The charm of having gold is irresistible, and the idea of owning something beautiful that can be passed down through generations appeals to many.

Indian’s love for gold jewelry is an open secret. Forbes even stated that Indians purchased 562.2 tonnes of gold in 2023. The demand is substantial, and the enthusiasm is electrifying. The Indian’s love for gold is untenable, and the burning question echoes louder: Is gold jewelry a good investment option?

Let’s delve into the reality.

Why Gold Jewelry is Not a Good Investment

Some limitations prove gold jewelry is mainly a luxury possession instead of an investment asset. These reasons are:

The Hidden Costs of Gold Jewelry: Making Charge

When you purchase gold jewelry, you're not just paying for the gold itself but also for the craftsmanship. The making charges, which typically range between 8% to 25% of the total gold weight, are added back to the price of the gold, including GST and Hallmarking charges.

These charges can vary significantly based on the intricacy of the design, the reputation of the jeweler, and the region where you're purchasing the jewelry.

Still not clear? Let’s understand this with the help of the below example.

Assume, on Diwali, Ravindra, and Kanti invested Rs.100000/- in gold jewelry. Although they invested Rs. 100000/- in gold jewelry but it might not have been worth this price. A big chunk of their investment, ranging between 8% to 25%, might have been deducted as making charges.

Making changes is the craftsmanship charge, which jeweler charges as jewelry-making fees. Therefore, when Ravindra and Kanti purchased gold jewelry, they lost a substantial part of their investment.

Resale Realities: The Making Charges and Beyond

The resale reality is also not different. Most jewelers will buy back jewelry based solely on the weight of the gold.

In other words, you won't be paid for the design. This means that the craftsmanship, which added thousands to the purchase price, is now worthless in terms of resale value.

No price for embellishments

The client’s ordeal won't end here; any stones or embellishments in the jewelry are typically not considered for resale value. This will further reduce your returns.

Environmental Effects: Wear and Tear

Due to wear and tear, the weight of your gold jewelry can decrease over time. Even the slightest reduction in weight can significantly impact the resale value.

For example, a pair of bangles that have lost just a gram of gold can lose thousands of rupees in value when you go to sell them. This reduction in weight and the consequent drop in value are often overlooked by those who consider gold jewelry as an investment.

The Buyback Dilemma

Another issue that often catches buyers off guard is the difficulty in selling gold jewelry back to the jeweler. Many sellers demand the original bill as proof of purchase.

Without the original bill, customers can face significant challenges, including lower buyback prices or outright refusal to buy back the gold. This adds another layer of complexity and potential loss to the already flawed idea of gold jewelry as an investment.

The Risk of Possession

Gold jewelry, unlike other forms of investment, is a tangible asset where ownership lies with the person who physically possesses it. This characteristic introduces a significant risk: if your gold is stolen or lost, thieves generally liquify the gold and change its properties.

In a nutshell, there is no easy way to prove ownership or recover lost assets, making gold jewelry a risky store of value. The very feature that makes gold feel like a safe investment—its physical tangibility—can also make it a liability.

The Fluctuating Price of Gold

While the price of gold itself has generally trended upward over the long term, it’s also subject to significant fluctuations. The value of gold is influenced by various global factors such as inflation rates, currency fluctuations, and geopolitical events. If you buy gold jewelry at a peak price and the price drops by the time you decide to sell, your investment could yield disappointing returns.

Consider Alternative Gold Investments

If any customer is keen on investing in gold but want to avoid the pitfalls associated with gold jewelry, consider alternative options. Gold ETFs allow you to invest in gold without the associated making charges or the risk of wear and tear.

Investors can track the price of gold and avail a more efficient way to invest in the metal. Plus, they can also trade them easily.

Think Before You Buy

Buying gold jewelry is not bad, but investing in gold jewelry, assuming it is an investment, is wrong.

The significant making charges, the inevitable loss in weight over time, the challenges in buyback, and the risks associated with possession all contribute to the fact that gold jewelry is more of a luxury purchase than a prudent investment.

If your goal is to grow your wealth, consider other gold investment avenues that offer better returns and fewer hidden costs.

So, the next time you find yourself eyeing that stunning gold necklace, remember—while it may be an exquisite addition to your collection, it’s not your golden ticket to financial security.

How To Make Returns from Gold Investments

The secret lies in Gold ETFs. Here’s a detailed comparison of leading Gold ETF schemes to help you make an informed decision.

Compare the performance of Gold ETF Schemes

So, the next time you find yourself eyeing that stunning gold necklace, ask yourself—am I buying a luxury item, or am I investing in a financial asset? This question will help you make a wise decision.

How MFOnline Can Help

At MFOnline, we’re committed to helping investors realize their financial goals. Whether you need personalized advice or want to invest directly through our app, our team is here to guide you every step of the way. Let us help you make the right and timely investment choices.