Can I actually make money by buying gold jewellery?

Can I actually make money by buying gold jewellery?

 

 

Experimenting with Gold Jewelry: A Case Study on Profitability

Investing in gold jewelry can be both a beautiful and financially intriguing endeavor. In this blog post, we’ll explore an experiment involving an 18K yellow gold ring weighing 1 gram to determine how long it would take for a buyer—let’s call her Jane—to break even after purchasing the ring under different selling scenarios, factoring in inflation. We chose 18K gold specifically because it offers an excellent balance between durability and beauty, making it much more suitable for daily wear jewelry.

The Setup

Gold Specifications:

  • Ring Weight: 1 gram
  • Gold Purity: 18K (which is 75% gold)
  • Current Market Price of  24K Gold on Oct 2024: $87 per gram

In 2015, the market price for 24K gold was approximately $40 per gram, making it an interesting benchmark for understanding gold value fluctuations over time.

Given that 18K gold is 75% pure, the value of gold in the ring can be calculated as follows:

  1. Value of Gold in the Ring:

    Gold Value=Weight×Purity×Current Gold Price=1g×0.75×87=65.25USD\text{Gold Value} = \text{Weight} \times \text{Purity} \times \text{Current Gold Price} = 1 \text{g} \times 0.75 \times 87 = 65.25 \text{USD}
  2. Workmanship and Retail Profit: When sold to Jane, the 18K ring also includes workmanship and retail markup. Assuming the added costs lead to three updated selling price scenarios:

    • Scenario 1: $90 (3 times the gold value)
    • Scenario 2: $150 (5 times the gold value)
    • Scenario 3: $210 (7 times the gold value)

Based on a quick google fact check and our own knowledge, it is more likely the ring is probably sold under scenario 2 ($30 for gold and $70 dollars for labor and etc) assuming jewelers typically have profit margin of about 50%. But we included Scenario 1 and 3 to account for various selling prices. 

Lets Time Travel to Oct 2024! 

Jane got tired of wearing her ring and decides to scrap the ring for some extra cash to fund her new gold ring of 2 gram! How much would she receive today? 

Jane is probably not going to receive $65 as the dealer will take a cut, so she will realistically get about $55 - $60. Jane hasn't broken even! Just as there are different scenario prices you can buy the ring under, there are different scenario prices you can sell the ring as well! Perhaps listed them on Facebook Market place or Ebay will typically fetch a better price at expense of greater effort from Jane to sell. 

Conclusion
If we factor inflation, Jane probably has another 10-15 years (depending on how much she bought the ring for) to go before she breaks even on her ring purchase. But if we look at this experiment from another perspective, Jane has effectively spent roughly $30 - $100 for the opportunity to enjoy wearing that ring for 8 years! Isn't that a good deal in itself? This is one reason why many financially savvy celebrities are willing to splurge on fine jewelry!  

If you are looking for gold as an investment, best to stick with gold bullions. But if you want something you can wear and has an actual practice use, 18K gold jewellery is definitely something to consider! 

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