Gold as an Investment

Should You Consider Your Gold Jewelry An Investment?

Should You Consider Your Gold Jewelry An Investment?

The price of gold has climbed sharply over the last twelve months. In January 2010, the London fix was at $1,121. By mid-December, the price had climbed past $1,400. Because of this quick appreciation, many people are now investing heavily into the precious metal. But is doing so a wise decision? More to the point, should you consider your old gold rings, pendants, and bracelets to be an investment?

Below, we’ll provide a clear perspective on this issue. You’ll learn why many experts are calling the precious metal a poor investment right now, and why selling your gold jewelry may be wise. We’ll also present a few reasons many people have decided to sell their gold to an online buyer.

Gold As An Investment Versus A Hedge

The London fix has risen because money has flooded toward gold. A lot of people have been moving their assets into the precious metal for various reasons. Some feel uncertain regarding the political and economic climate in the U.S. Others feel the monetary base will continue to expand, causing the dollar to fall in value compared to gold. Still others are moving into the precious metal for investment purposes. Drawn by the healthy 25% return delivered this year, speculators are hoping for a repeat performance next year.

But therein lies the problem. When speculators move heavily toward a specific asset class (as has occurred with gold), the price of that asset climbs past the point of reason. Experts refer to this phenomenon as a balloon. The balloon may continue to inflate, but it will eventually pop. When it does, those who are left holding the asset will lose a substantial amount of value. Imagine the price per troy ounce of gold plummeting to $700 (approximately half its current level).

Aside from speculation, gold has historically been a poor investment. Other asset classes (e.g. stocks, bonds, etc.) have yielded higher returns over extended periods. For example, the Dow Jones Industrial Average has increased 1,304% since January 2, 1980. Gold has only increased 150% over the same period.

The metal is used properly as a hedge against an uncertain future. A rapidly-climbing price is evidence of a widely-held fear of inflation. If this fear vanishes, money will flow out of gold into stocks and other asset classes. This will cause its price to plummet. For this reason, consider selling your old gold jewelry while the London fix remains high.

Additional Reasons To Sell Your Gold Jewelry

There are many other reasons to sell your old gold necklaces, money clips, chains, and class rings. For example, your pieces may be broken, and thus unwearable. Or, they might have gone out of fashion, becoming relics from a past age.

Another reason to sell your pieces is to raise funds to pay bills and reduce debt. With the unemployment rate hovering near 10 percent, selling your gold jewelry may provide valuable breathing room.

If you have a substantial collection of gold chains, bracelets, rings, and brooches, consider selling them to use the money for other investments. Many experts feel the stock market is poised to climb sharply as the economy improves. Thus, selling your precious metal jewelry, and moving the money into a mutual fund might prove prescient.

Also, a lot of people have depleted their savings while trying to make ends meet over the past few years. While they continue to maintain jobs, they lack savings for emergencies. A broken water heater, malfunctioning refrigerator, or leaking roof, may place an enormous financial strain on their already-stretched budgets. By selling your gold jewelry while the price per troy ounce remains near record levels, you can rebuild your savings to prepare for emergencies.

Gold has seldom represented a good investment over long periods, especially given taxation on capital gains. Instead, the precious metal is merely a hedge against the future. If you currently have old, broken gold watches, bracelets, or necklaces that are gathering dust, now may be an ideal time to sell them.