Which Investment? Shares, gold, pensions? The idea of an investment is not a complex one. We buy something and hopefully its value increases. But not necessarily.. when we buy shares or pensions even the small print tells us that the value of our investment can go up, as well as down.
These days we are even told our investment might be worth less at the end than the money we put in. This stands to reason – if a company goes bankrupt its share price is likely to tumble.
Gold (and platinum) is a commodity, a physical asset that carries real value. Gold has been in demand ever since it was first discovered. Gold cannot 'go bankrupt' and unless human beings stop coveting it, there will always be demand. Demand for gold isn’t constant however, it is subject to the demand for physical gold for jewellery and demand for it as an asset.
When the economy is doing well, people want more gold for jewellery. When the economy is doing badly, people spend less on jewellery. The trouble is that the price of gold rises when the economy is doing badly and drops when the economy is doing well. These price variations have to be absorbed by jewellers; in order to cover themselves they will tend to use less gold or platinum when it is expensive – see our piece on Millenium jewellery being especially good value.
The price of new jewellery always rises. Labour, marketing and other overheads all contribute, as well as the fact that luxury items by definition cannot become cheaper. It does not make sense however, to invest in new items. It typically takes 30 years to recoup the value of a new item because so much of the RRP goes on the company’s overheads.
But what if there was a way to harness the increasing price of designer jewellery whilst hedging or mitigating against the vagaries of commodity prices – gold & platinum?
This is where pre-owned luxury jewellery comes into its own. The value of designer high jewellery (platinum, gold), whilst deriving something from the price of commodities, is insulated from the ups and downs of the price variations just as the fine jewellers are who produce the pieces.
Have you ever heard of Cartier lowering the price of their “Love” bracelets from one year to the next? Of course not! So, as the new price of luxury jewellery does not go down, neither does that of the secondary market. This makes pre-owned designer jewellery the perfect 'hedge' against falling gold/platinum prices.
Hedge funds are designed to withstand shocks to the market. A hedge fund might contain funds in a company, which predict an increase in the value of the company's shares at the same time as funds which predict a decrease. Luxury designer jewellery provides a 'hedge' against the value of gold or platinum dropping. The value of the brand and workmanship do not decrease over time as evidenced by the fact the new items never reduce in value.
So, if luxury designer jewellery is such a good buy why don’t we hear more about it? The truth is that it’s an opaque market where 'value' isn’t clear. You need reliable dealers with a good instinct for what will make a good future investment. Brands such as Tiffany & Co., Cartier and Bulgari will always hold their value, but within those brands there are certain pieces, which carry more investment potential than others.
If you buy new jewellery you might wait 30 years to recoup the original asking price. But with pre-owned branded jewellery you could be looking to making a substantial profit on the price paid after as little as 5 years. If you’re really lucky you could buy something that becomes the next super coveted piece...
If you would like to talk to us about jewellery for investment please call us on +44 207 692 5103 or email firstname.lastname@example.org and we’ll be happy to give you our considered advice.