Gem of an investment
18 Sep 2013
Investing in jewellery is not just about the returns. You’ll be able to enjoy the pieces of gold in the meantime.
Enjoy those stones
The beauty of investing in jewellery is that along with the potential financial gains it offers, jewellery is a commodity that can be enjoyed. As a long-term investment, Head of Jewellery at Leonard Joel Auctioneers, John Dagata recommends purchasing items based on your personal tastes, as much like art, the piece may not turn out to be as valuable as you anticipated.
“It’s the old painting principle, you can invest thousands of dollars in art and then in ten years time those artists are no longer popular. If you purchase something you like, at least you will have enjoyed the investment.”
While the value of jewellery is reliant on fluctuating gold and gem markets, Dagata says jewellery is by comparison a good investment.
“There are things that we buy such as cars, and white and electronic goods which all depreciate rapidly and you can’t get anything back for.”
While the gold market can be volatile, jewellery still holds the potential to double or triple in value over time.
Popularity growth
Managing Director of Andrew Shapiro Auctioneers, Andrew Shapiro agrees that jewellery is an extremely viable avenue of investment and one that is growing in popularity.
“We are watching some of the biggest investment portfolios looking in a very serious way towards jewellery,” he says. “High-end coloured stones and solitaire diamonds are now going into very significant portfolios alongside fine art and real estate.”
The jewellery market is not however limited to big spenders. Shapiro says there have been an increasing number of individuals entering the jewellery market, with investment pieces starting at around the $5000 mark.
Think long-term
Investing in jewellery is a long-term decision and one that isn’t suited to individuals who think they can buy a piece and sell it for profit straight away.
Unless you really know what you’re doing, investing in jewellery is a enduring prospect with no certainties.
For first time investors, the key is to stay away from mass-produced jewellery, which unfortunately makes up 90 per cent of the market.
As a starting point, Shapiro says gold is a solid investment as it is an international commodity that will always have an intrinsic and strong resale value.
When purchasing precious metals like gold and silver, Shapiro recommends investors buy from well-known international brands.
“If you have a gold bracelet from Tiffany and Co it will bring a premium well above the weight of the gold. If it’s just a plain 18-carat gold link bracelet, it will bring its weight plus a premium based on the quality of its design,” says Shapiro. “What I’m saying is that if you spend a bit more and buy something branded you will see a greater increase in its resale value down the road.”
Know its value
When it comes to knowing what’s valuable, Dagata says there are some common misconceptions.
The first and most prominent is that every item of jewellery is valuable.
“Like everything else there are good and bad stones,” he says. “What people need to realise is that condition plays a huge part in whether a piece of jewellery is valuable.”
What also comes into consideration is the size of the gem and the quality of the setting.
“We have been manufacturing jewellery for more than 200 years, so even though a piece may be old, it’s not all precious and rare.”
Whether a stone has inclusions, chips or cracks will also heavily impact its resale value. For example, a five-carat diamond will only bring $5000 if it has inclusions, whereas it could be worth $100,000 if it is in perfect condition.
Shapiro says it is a much greater science for a private buyer to be involved in purchasing coloured stones or diamonds than gold or silver.
Ask the experts
For first time investors, Dagata recommends seeking assistance from a reputable source. “Unless you have some form of education in gems and jewellery, you need to have someone to call on for advice that you can trust,” he says.
For this reason Dagata advises new investors to steer clear of purchasing from the Internet unless they are certain they know what they’re doing.
Shapiro recommends investors look to auction houses to avoid the mark-ups from the middleman.
“That doesn’t mean you can’t buy fabulous jewellery from retail stores, but you will be paying at a greater mark-up.”
Like other investments, there are risks associated with investing in jewellery.
As is currently the case with pearls, markets can quickly lose their value.
“At the moment fresh water peals have swamped the market, which has brought down the price of Tahitian pearls and traditional Japanese Akoya pearls,” says Dagata.
Despite these risks, if you’re willing to be patient and commit for the long term, jewellery is an excellent investment that not only brings financial but lifestyle rewards.
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