Mention investing, and the first things most people think of will likely be stocks, bonds and retirement accounts. Press a little further, and alternative investments like real estate and commodities might spring to mind. But there may also be investment potential of the precious metals sitting right on top of your dresser.  

While the core of a person’s investment portfolio should be a diversified array of stocks, bonds, and some cash, exploring jewelry as an investment opportunity may be a good fit for some. Investors, as always, should be mindful of their unique risk tolerance, portfolio diversification, and liquidity within their portfolio. 

Jewelry vs. precious metals 

Gold, silver and other precious metals, sold in nuggets or bars, have historically been seen as attractive investments that can help diversify a portfolio. But when precious metals are turned into jewelry, their value changes.  

The value of any jewelry item is usually determined by the individual piece, not the sum of its parts. Keep in mind, too, that jewelry prices are typically affected by craftmanship and exclusivity. Plus, retail stores often sell jewelry at a markup, which means that items can cost 35% more than the actual metals and gems are worth.¹  

That said, one of the benefits of investing in jewelry is the low barrier to entry. You don’t have to spend tens of thousands of dollars to invest in an item that could eventually turn a profit, even if it’s a small one. If you have decided to add fine jewelry to your investment portfolio, you have a plethora of metals and gems to consider, from gold to platinum to silver.  

Is gold jewelry a worthwhile investment? 

The price of precious metals fluctuates daily therefore, jewelry manufacturers use the price on date of delivery to determine the overall jewelry price. That can be good news if you’re looking to invest in gold jewelry, since its price will increase as the value of gold goes up.  

It also helps that you don’t have to spend tens of thousands of dollars to invest in an item of gold jewelry. You can own a 14-karat piece of gold jewelry for $200-$500, for example.  

So yes, gold jewelry can be a sound investment. As for other precious metals, items made from platinum can also hold significant value, while sterling silver is considered mid-range jewelry.  

Read more: All that glitters: How to invest in gold

Do diamonds appreciate in value?  

Diamonds are generally not considered strong investments, since, like new cars, they typically lose value at the date of purchase.² That’s because when you buy a diamond from a retailer, you’re usually paying for more than the cost of the diamond itself. (The price of jewelry is usually marked up to cover the retailer’s expenses and to ensure a profit). And depending on the appeal and exclusivity of the retailer, the markup amount can be quite high.  

Do lab-grown diamonds appreciate in value? 

Buyers are increasingly becoming more concerned with sustainability and how precious gems and metals are sourced. This concern has led to the increased popularity of lab-grown diamonds, which are usually more cost-efficient than naturally occurring, mined diamonds. Unfortunately, just like natural diamonds, lab-grown diamonds start losing value at the date of purchase, so they tend to be weak investments. 

Prioritize quality 

Keep in mind that it’s the high-end, fine jewelry you’ll want for investments, since this is more likely to hold or increase in value over time. Pieces with imitation stones and gems won’t hold up as well as luxury items. 

Financial professionals also generally recommend investing in jewelry with a fineness stamp to indicate the purity of the materials. For example, an item that contains 85% pure gold will be labeled “850 fine.” Also consider investing in pieces signed by the manufacturer. 

Types of jewelry that appreciate in value 

When it comes to jewelry, there are countless end products, such as rings, watches and bracelets. Generally, no one type of jewelry is more likely to appreciate in value than others. However, heirloom pieces that have been in your family for generations may hold significant value due to their age—especially if they were made by a notable brand or craftsman. 

Watches that appreciate in value 

Watches are one of the most collected types of jewelry. Because of this, certain watches may be in high demand at certain times, driving high resale prices. Brand recognition, heritage and exclusivity all play a role in the resale value of watches. Watches made by well-known high-end brands like Rolex and Patek Philippe are more likely to appreciate in value than lesser-known brands.  

However, there can still be volatility in the secondary market with brands such as Rolex and Patek Philippe. We are currently seeing the secondary market soften from the highs we were seeing in demand from the pandemic.  

Rather than considering a watch an investment, you may want to go into buying a new timepiece with style and functionality front-of-mind and take any appreciation in value as a bonus.  

What is my jewelry worth? 

Each potential buyer will value your jewelry differently, especially if it has specialty cuts and designs. The goal for most jewelers is to purchase these items to resell or melt down to create new designs. 

When you’re ready to sell, help set yourself up for success by working with a reputable appraiser. You can also use an online site to calculate your item’s gold scrap value by providing the weight and purity of the metal. Keep in mind that the IRS (Internal Revenue Service) considers metals and gems to be collectibles, which means you will typically owe a 28% capital gain tax on your investment gold and jewelry. 

The bottom line 

Jewelry has the potential to be a good investment and can also be a fun part of a diversified portfolio. Just keep in mind that unless you have a lot of high-quality pieces, or one or two very valuable items, it’s not likely to bring in mind-blowing returns.  

That doesn’t mean it’s not worth collecting, though. One thing about jewelry is that if it doesn’t hold much resale value, you can always choose to wear it instead. Ultimately, consider your jewelry purchases to be a lifestyle choice, one that enriches your financial happiness in the here and now.