Trends come and go on the investment market, making it difficult for beginners to identify the most profitable options and protect their portfolio. For decades, gold and precious jewelry have been used a “refuge” investment, because, unlike stocks or bonds, their value never reaches zero and they are always in demand. However, the economic crisis proved that not even gold can have a certain degree of volatility and that, just like all other investments, gold investments need to be approached with care.
In a report entitled Gold 2048: The Next 30 Years for Gold, The World Gold Council talks about the rise of the middle class in emerging markets, particularly China and India, which is the biggest consumer of gold, and how this will lead to an increase in gold demand. At the same time, due to the fact that gold also has industrial applications (tech, medicine, solar panels, automotive), the value of this precious metal is expected to increase even more. These trends taken into accounts, how should investors include gold, jewelry, and precious metals into their portfolio to make the most out of them?
Gold investments: ETFs vs. physical bullion
There are two ways of investing in gold: ETFs and physical bullion.
ETFs, often chosen by beginners, are very convenient, because you don’t actually physically own the gold, you don’t need to worry about taking delivery or arranging storage. However, this convenience comes at a cost: because ETFs are nothing more than a financial instrument, they can become very risky. This is why they are recommended for Shorter-term trading and obtaining leverage through the futures and options market.
Meanwhile, physical bullion is not correlated to the stock market. You own the actual physical gold and, even though you will have to arrange storage and security measures, it has none of the risks associated with paper gold. Investors who purchase physical bullion don’t have to deal with a counterparty, and they have an investment that is durable and liquid.
As for the best place to purchase gold, the wisest course of action is to either browse the local market for a reliable seller or buy from a specialized online seller. However, avoid eBay and auction sites, because prices can escalate quickly and you may end up spending more than necessary.
Other precious metals
Gold is the most valuable precious metal, but not the only option. Silver, for example, is also an excellent hard asset. In fact, some may argue that it can even be more profitable than gold because it comes at a fraction of a cost and it protects you just as well against an economic crisis. Also, silver can be a great addition to an existing gold collection, because it’s more practical to sell and suitable for small purchases. Just like gold, silver also has a growing number of industrial applications, and demand is expected to rise.
Platinum is also a great option that is often overlooked, and that can be an advantage. The demand for platinum is increasing because it performs well in poor economic conditions, but, unlike silver and gold, there is a limited supply for platinum and 90% of it is found in Russia and South Africa.
Fine jewelry investments
Although precious metals in the form of physical bullion are excellent investments, the value of high quality, precious jewelry is also undeniable. Whether it is collected as family heirloom or purchased to provide ROI, the price of jewelry increases over time and it can add some diversity to your portfolio. Nevertheless, investing in jewelry is not as easy as it sounds, especially because many jewelry brands are fashion statements now, but they depreciate in the long run. Moreover, when purchasing jewelry, you are also paying for the marketing costs, so that’s one essential aspect to consider when deciding in what and how much to invest.
Pearls are some of the most valuable gems and, as long as you learn how to make the difference between real and fake ones, they can provide a huge return on investment. On average, the value of one single pearl ranges from $300 to $1500. Natural pearls are more valuable than cultured pearls and, the rarer and larger a pearl is, the more its price will go up. For example, the largest pearl in the world, measuring a whopping 26 inches, is now valued at $100 million. Of course, this is a rare example that’s not accessible to everyone. However, South Sea pearls, which are considered to be the most valuable, range from $1,000 to over $100,000 per piece. Compare your options, make sure the pearls you buy are genuine, and your finances will benefit in the long run.
Luxury watches can also be a good investment but, once again, it’s very important for buyers to make the difference between trendy watches and high-quality timepieces whose value increase over time. For example, the Patek Philippe 1518 was auctioned at $11 million, but that’s because Patek Phillipe is the last family-owned Genevan luxury watch manufacturer, a prestigious company with a long history. There are many designers who also make watches, but those are oftentimes fashion statements that lose their popularity and value in a matter of years.
Last, but not least, designer jewelry can also offer a great investment opportunity, as long as you choose items that hold their value. Trendy jewelry is a clear no-go, but vintage items from iconic brands like Tiffany, Van Cleef & Arpels or Cartier, can be worth millions when passed down from generation to generation. In terms of the most valuable precious gems, diamonds are the clear winner, followed by musgravite, jadeite, alexandrite, and sapphire.
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.