The jewelry industry has been in ‘chaos’ with gold prices soaring 50% this year — how to secure your own shiny profits

Considered a safe haven in turbulent times, gold has crossed a significant milestone, coming in at $4,000 per ounce for the first time in early October.

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Turmoil in Washington and related concerns about the stock market and economy have been fuelling the commodity’s rapid rise since last year. Although the price saw a reversal in recent days, some investing experts say it’s still a buy, and there has been a rebound.

“It got ahead of itself, no doubt about it,” said Kevin Smith of Crescat Capital hedge fund to Bloomberg. [1] “Given the still unsustainable debt and deficit imbalances that we have in the U.S. and most of the developed world, it’s still a very favorable fundamental backdrop.”

Legendary hedge fund founder Ray Dalio has said that the current economy closely mirrors that of the 70s, when there was high inflation, and urged investors to hold 15% of their portfolio in gold.

Goldman Sachs sees the price reaching $4,900-per-ounce by the end of 2026.

However, while investors put money in gold, there’s one group of traditional buyers of the commodity who are struggling: Jewelers.

For both mass retailers and small business owners, the sky-high prices of gold are cause for concern, and many jewelers are changing their strategies or considering a shift to less expensive materials.

Here’s what the new race to the top for gold means for your favorite jeweler, and what you should know about gold investments if you’re considering investing in this high-flying commodity.

The cost of jewelry

CNBC reports that multiple major retailers like Mejuri, Pandora and Signet are changing their strategies: exploring alternative manufacturing methods and streamlining supply chains, but price hikes seem inevitable for the brands. [2]

“The last month has been chaos, pure chaos,” said David Hakimian, owner of DEH Jewelry Solutions in an interview with The Wall Street Journal in May. “It’s affecting pricing dramatically.” [3]

He said some designers were considering changing from using 18-karat to 14-karat gold. There is also the opportunity to sell gold plated jewelry that preserve the look of their brand’s designs.

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“We’ve actually seen a really huge increase in interest in demi-fine,” BaubleBar co-founder Daniella Yacobovsky told CNBC. “I think that it offers people a really fantastic alternative to solid gold. … You’re going to get a really fantastic quality similar to that for a lower price point.”

While consumers may either opt for lower-cost gold plated pieces or look at their gold jewelry buys as an investment, the rising price may ultimately affect the market and shut all but the ultra-wealthy out. Even silver jewelry may take a turn — prices leapt from around $40 per ounce in early September to more than $54 in mid-October.

How to invest in gold

While investing in gold jewelry is one way to get in on the gains in this commodity, it’s not usually the best way to realize value.

For investors who want to ride the wave of this upswing, consulting with a qualified financial advisor before making any moves is the best bet before buying any new kind of investment, no matter how solid it looks right now. Investments should always be made with an eye to your long-term financial goals, and your tolerance for risk.

Investors have two main paths for gold investments: Directly holding physical assets like gold bars or bullion, or indirect investments through stocks and similar financial products. For average investors, indirect investments are usually preferred since you can avoid security and storage costs.

The different gold-related asset types include:

Gold IRAs

With the tax advantages typically associated with market-based IRAs and the bonus inflation hedge, gold IRAs are popular as investment vehicles. You can opt for a traditional IRA that is tax-deferred, or a Roth IRA funded with your after tax dollars. Some of the cons are higher fees, low liquidity and no income.

Small businesses and self-employed investors can also invest in gold through a SEP IRA.

Gold ETFs

Gold ETFs have a number of advantages, including the ease of buying and selling, the low fees — sometimes just 0.10% — and a low price of entry compared with buying physical gold. ETF investments can include direct exposure through investment in shares in physical gold bullion, or investments in gold-mining stocks.

Mutual funds

Many large funds will already have some exposure to gold as a hedge, but there are also gold-only funds available, with investments in the commodity and in gold-related industries.While mutual funds are considered more expensive to invest in because of their associated fees, many investors rely on the expertise of the fund’s managers to lower their risk.

Gold mine shares

Gold mining company stocks rise with the price of gold. However, the performance of the company is also a factor in the price of their stock — as with other types of stocks, a hit to the company’s reputation or an increase in production costs can impact the share performance. As with buying any individual stock, it’s important to understand historical performance, leadership at the company, and market context before you buy.

Physical gold

Physical gold may seem like an attractive investment for many reasons, but average investors may find it tricky to hold. In addition to the high entry price, physical gold comes with storage fees for security. Bullion and bars are illiquid — tough to buy and sell quickly. While some investors opt for gold coins for greater liquidity, buying requires a lot of research, including finding a reputable dealer.

Gold jewelry

While about 49% of all global gold mined is used in jewelry, the markup on this jewelry can be significant, as the price also reflects a company’s operating costs, marketing, and the cost of the design and manufacture of the piece. Therefore, it’s not always possible to realize a good return on the investment, especially for mass market designs. Most collectors consider investment in jewelry a speculation, like with fine art and other alternative investments. In order to know how to invest in gold jewelry, you must know the market and devote significant time to research.

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Article sources

We rely only on vetted sources and credible third-party reporting. For details, see our editorial ethics and guidelines.

Bloomberg (1); CNBC (2); The Wall Street Journal (3)

This article provides information only and should not be construed as advice. It is provided without warranty of any kind.