Guilt Free Indulgence: Fine Jewelry

With consumer confidence waning as it tends to do when the economy is down, or when there is political unrest (the US federal government shutdown definitely qualifies) discussions generally turn to preserving wealth and tightening one’s belt to conserve. ‘Real money’ aka gold has started to become a hot topic again and with prices having retracted to 2010 figures, it is looking more and more attractive.

What does this have to do with the collectible world? Well a lot actually. Many of my clients regularly buy high end jewelry. Even though they don’t see it as such, they in fact have amassed quite incredible collections that are valuable even merely as just scrap!

Why is this so important? Because I just made a large sale recently thanks to a discussion with a client who was shopping for jewelry for his wife. He realized he was likely to buy a whole bunch of gold coins anyway soon and could kill two birds with one stone.

A fine jewelry collection built over a long period of time brings wonderful joy to the wearer. In addition, a collection can be and often is, quite a considerable part of a couple’s or individual’s wealth.

With the purchase of most things such as clothing and cars, it takes many decades to build a collectible group of any note, except in the very rare instance. Until then these items will likely decrease considerably in value. They might not become collectible at all, especially since many of today’s fashionable items are mass produced.

Precious metals and precious gems on the other hand have been steadily increasing decade after decade. Gold in the last decade alone has risen 300% despite coming down from its highs. Diamond wholesale prices have increased 925% since 1960 (according to wealthymatters.com). And that is just for a generic one carat white diamond! The fact is it is becoming more and more expensive to mine these valuable commodities at reasonable prices. They are harder to get to, the density of the finds is far less, labor is higher and gas prices have risen 400% since 1993 alone!

People are not losing interest in precious metals and minerals. On the contrary even just the loose stones are racking in record prices. Take for example the flawless white 118 carat diamond that raised $30.6 million on October 7th at Sotheby’s auction. And in November Sotheby’s is estimated to raise more than $60 million for a 59.60 carat pink diamond. An expected record breaker for any gem auction!

Indeed bling is as popular as ever.  With prices of the underlying raw materials continuing to rise decade after decade, at a rate far higher than inflation, so has the price of good quality jewelry. Given that the world population continues to grow and the mineral reserves depleted there is no reason it shouldn’t.

So this is where the guilt free pleasure comes in. Many people keep a portion of their wealth in gold or other precious metals – physically in the form of gold bars and coins, or in other less tangible forms like securities. Why not view your household’s collection of jewelry as a long term investment and on the downside a solid hedge.

Heaven forbid you should ever have to sell under duress. It is comforting however, in times of uncertainty to know you have a liquid and portable collection that can be sold at the very least for scrap and likely more. Most dealers in fine jewelry are willing to buy back pieces at wholesale prices at the very least, and much more for rarer items. Short term loans with jewelry as the collateral are becoming more common and allow one to not have to sell the items at all.

The shoe collection will bring you pleasure over the years like the jewelry, but will do little more than keep your feet warm in a time of crisis.

Obviously fine jewelry will be sold at a premium price, it includes labor and many other costs (especially in the case of good vintage and antique pieces). This premium is worth it, especially since you will hopefully get a lifetime of pleasure from it. As long as you purchase for a fair price you will know in the back of your mind that you have a good hedge for any crisis. Don’t be scared to haggle a bit with dealers, or make offers. After all you are not just buying something pretty, you are making a serious investment.

So enjoy your stunning treasures, guilt free, you know you deserve it!

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