It’s the time of year when people try their hardest to give loved ones gifts that have lasting value.
For my grandmother, that gift often turns out to be an heirloom piece of jewelry. She has given me several pieces, and each time with the words: “You can sell it if you need money.” I can’t say that hasn’t crossed my mind. Then again, who has the heart to sell a family heirloom?
Buying a friend or loved one an original piece of jewelry with the caveat that they may always sell it if they need some extra money could be a diplomatic middle ground. In other words, buy them a gift that is literally intended to pay off at some future date.
Some companies sell jewelry for people interested in buying it as an investment. One is Menē Inc. (pronounced “meh-nay”) MENEF, -9.37%, which crafts 24-karat gold and platinum jewelry. It defines “investment jewelry” as a store of value that can appreciate over time. (24-karat gold is essentially pure gold.)
GoldSilver.com sells gold and silver bars and coins, as well as 22- and 24-karat gold jewelry. The precious-metals retailer offers gold pieces from its own line of jewelry as well from New York-based Auvere, which creates and sells high-karat gold jewelry online.
“If you’re going to buy jewelry as an investment, be sure it’s something you’d enjoy keeping and potentially wearing,” said Adam Koos, president and portfolio manager at Libertas Wealth Management Group. “Worst case, if you can’t unload it, you’ve got something you can enjoy.”
He said commissions and fees on jewelry can be high. “The transaction should take place with a reputable company.” And if you end up overpaying for a piece of jewelry? “Good luck cutting for a break-even,” Koos said.
The value of design vs. the material
Menē, which sells exclusively online, has an average markup of 20% over the precious metal weight, so a $200 ring has $160 worth of precious metal, according to Roy Sebag, co-founder and chief executive officer of Menē.
The average markup at GoldSilver.com stands at roughly 35%, said company president Alex Daley. Markups for gold jewelry on eBay EBAY, +0.67% and retail stores vary widely, with premiums anywhere from double to three times or more over the metal’s value.
If you decide to sell your jewelry, Menē will buy it back at the real-time value, less its 10% buyback fee, then melt it to make new jewelry. GoldSilver.com will offer a price close to the value of the pure metal in your jewelry, and sell it to a gold refiner who will melt it into bullion.
If the company you purchase jewelry from doesn’t offer a buyback option, you can calculate gold scrap value using websites such as Goldcalc.com or Meltvalue.com, by entering the weight and purity of the metal.
There are laws regulating the purity stamp on the metal, but a testing kit can help you verify purity. Of course, the jewelry may have value beyond the price of the precious metal in both its design and the quality of the gems, so it’s best to get an appraisal by a reputable jeweler.
Precious metal prices can be volatile
Jewelry, however, is like any other investment: The value can fluctuate wildly. Gold futures settled at $1,463 an ounce Wednesday, with most-active contract prices down over 3% month to date, but up more than 14% for the year. Platinum futures at $875 an ounce have dropped about 6% this month, though they trade over 9% higher year-to-date.
The most obvious difference between a pair of earrings and gold bullion is that you can’t wear the latter. But treating jewelry as an investment can get tricky.
With a few exceptions for certain coins and bullion, the Internal Revenue Service considers metals and gems to be “collectibles.” Profits on the sale of gold and jewelry are taxed at 28%, according to Lawrence Pon, certified public accountant at Pon & Associates.
Selling shares in the gold-backed exchange-traded SPDR Gold Shares GLD, -0.37% would be taxed at capital-gains rates, according to Pon.
Deric Scott, vice president and senior analyst at precious-metals retailer Metals.com, said purity is not in question for bullion bars as they come with an assay certificate, while bullion coins are rated based on fineness of purity, and jewelry is stamped based on the karat system.
Buying jewelry made of pure gold and silver will not harm the value of the metal, but “you may be paying a premium that you may not get back, which makes your acquisition cost significantly higher versus other investment options,” said Scott.
For some buyers, however, it’s worth it if you can wear it.
“I don’t compare my investment jewelry to Tesla TSLA, +1.27% or Apple AAPL, +0.19% stock,” said Christopher Hagler, an investor who buys Menē jewelry. “I compare it to regular jewelry I would have bought anyway.”