Throughout history, until a very recent time period, wealth was defined by the amount of wealth and precious metals you owned. So, it makes sense why big name celebrities would walk around with thousands of dollars of jewelry, all in order to show their wealth. But the question is, does that jewelry even hold its value now. The answer is no, and here’s why.
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Jewelry Price Trends
The answer all comes from want and demand. Below is a graph comparing the price of platinum and gold. The graph seen below is when I knew why precious metals and stones were an awful investment, a way for rich people to look cool and throw their money away.
Now, at first glance I knew something about this graph was weird. According to one source, platinum is thirty times more rare than gold. So, that means that the value of platinum has nothing to do with the rarity of the substance.
Instead, it turns out, that the whole gold economy is oddly enough based on fashion trends. As much of a stretch as this theory sounds, it is really not that surprising. In fact, almost fifty percent of the world’s gold is in jewelry. So, half of the substance being in a trend is never good.
For example, we can see a huge recent drop in the price platinum in the past few years. While there are many opinions on what has caused this drop, I believe it has to do with platinum becoming less popular and diamonds becoming popular. Since diamonds typically look better with gold, platinum jewelry is no longer as impressive.
In fact, take a look at this graph that describes the price for diamonds. Recently, there has been a major spike due to a new fashion trend that makes wearing diamond necklaces socially acceptable for men. In reality, most investors would have expected the price of diamonds to tank recently. After all, there has recently been a boom of manufacturing in lab-grown diamonds.
Also, diamonds are 3x more common than gold. Even after all of this, diamonds are still worth more than gold per ounce. The reason for this is actually pretty simple. Although fashion trends play a big part in the value of a diamond, there is a huge factor that I have failed to mention.
Are You Paying For Art Or Diamonds?
Most of the value in jewelry comes from the wok that has to be done in order to make it. Jewelry is a very complicated process to make as many things must be cut, casted, polished and melted. Diamonds are extremely hard to work with since, as most people know, they are the hardest materials on Earth.
So, only a few trained professionals know how to cut a diamond. Since it is a rare task, when you buy the diamond you are mostly paying for the work that the jeweler did. However, when you resell the diamond the buyer will probably want to use the materials for something else.
So, what happens is the buyer pays you for the materials, which we have already mentioned above as a highly fluctuating market. Since you paid for the art and the materials, you would be pretty lucky to get sixty percent of what you paid for your product back.
Investing in jewelry for the most part is a terrible decision. Some name brand watches can sometimes go up in value due to their complexity or historical value, but rarely due to their precious metals.
Jewelry is truly one of the worst investments you can make. As I’ve discussed in this article here, investing in something based off of trends alone has always been dangerous and always will be. You should only invest in something backed by numbers where results can truly be better predictable and more likely to gain money.
If you would like to learn more about an investment app called Acorns, you should check out my article here. If you would like to sign up for investment apps, you should check out my two favorite investment app, Acorns and Webull.
The Mysterious White Metal That’s Rarer Than Gold. (n.d.). Retrieved January 19, 2021, from https://platinumjewelry.com/why-platinum/rare/
Garside, M. (2020, July 10). Global gold demand by industry share 2019. Retrieved January 19, 2021, from https://www.statista.com/statistics/299609/gold-demand-by-industry-sector-share/
A Brief History of the Wristwatch – Part 1. (2019, November 14). Retrieved January 19, 2021, from https://www.bobswatches.com/rolex-blog/resources/brief-history-wristwatch.html
The sparkling rise of the lab grown diamond. (n.d.). Retrieved January 19, 2021, from https://www.bbc.com/future/article/20200207-the-sparkling-rise-of-the-lab-grown-diamond