Is Gold Jewellery a Good Investment?

Gold’s value goes beyond just its shiny appearance. Here are the key reasons why gold has been treasured and appreciated in worth for generations:

• Scarcity & Rarity: Gold is a finite resource, and mining new gold is expensive and time-consuming.
• Durability: Unlike paper money, gold doesn’t corrode, rust, or degrade over time, making it a long-lasting store of wealth.
• Universal Acceptance: Gold is recognized as valuable worldwide, making it a trusted medium of exchange across different cultures and economies.
• Safe-Haven Asset: During times of economic crisis, inflation, or stock market downturns, investors flock to gold as a stable and reliable asset.
• Intrinsic Value: Unlike stocks or fiat currency, gold’s worth isn’t tied to a company’s performance or government policies—it has inherent value due to its properties and demand.

If you believe in these fundamental strengths of gold as an investment, then gaining exposure to the asset class one way of another is a good choice.

While gold is considered a stable asset in the long run, its price fluctuates based on several factors. We also advise any potential gold investors to consider a long-term timeframe to optimize their potential returns:

• Economic Conditions: Gold prices tend to rise during recessions, inflation, and currency devaluation as investors seek safer assets.
• Supply & Demand: Limited mining production and increasing demand (especially in countries like India and China) influence prices.
• Central Bank Policies: When central banks buy or sell gold reserves, it can impact global prices.
• Geopolitical Events: Political instability, wars, and global crises often drive-up gold prices as people look for secure investments.
• Interest Rates: When interest rates are high, people prefer to invest in bonds and savings accounts over gold. When rates drop, gold becomes more attractive.

Although gold has historically held its value over time, it’s important to remember that short-term price swings can occur. Timing your investment can play a crucial role in maximising the returns you see. However, we’d argue that it’s always a good time to buy gold, as long as you have a long term timeframe.

Gold’s overarching appeal to investors is as a safe haven. Therefore, it’s best to invest in gold if you feel that a period of global instability or economic downturn is likely.

Next in line is physical gold bars and common bullion coins. Valuation is based on their weight and purity of gold. If the spot price per gram is £75 and the 24k bar weighs 10g, then in theory, the value is £750. However, this provides a basic mid-market rate, based on the spot price. While this may be suitable for valuation purposes, many investors will want to understand a more realistic ‘sell price’, which would likely be 2-4% lower.

Valuation of gold coins becomes tricker when the coins possess additional value due to rarity, history, or collectability. A prudent valuation of a Victoria Sovereign coin for example, would put their worth at that of a basic bullion Sovereign of the same weight. This would provide a worst-case scenario. However, it’s very possible that a dealer would pay a higher rate for the coin as they would possibly be able to sell it on at a premium too. This premium usually reflects the current state of the gold market. If demand is outstripping supply, then values are usually higher, and vice versa in low-demand periods. In this way, value can be more subjective and elastic to market conditions.

Bringing up the rear with ease of valuation, is gold jewellery. To start with, simply knowing the item’s weight, purity, and composition isn’t straightforward. Unlike a gold bar which will have its weight and purity stamped on it, a necklace will not. Checking for hallmarks may provide some information regarding purity, but overall weight can be ambiguous if the piece contains jewels and varying purities within its different components.

In addition, the price a buyer would pay is open to a large degree of subjectivity and is even more influenced by market conditions. This creates a very difficult framework to value your gold jewellery accurately and consistently. The value a jeweller would provide will most likely contain a far higher spread to where he thinks he can resell the item than bars or coins.  This increased margin reflects their additional risk that the item will only be resold when and if a new customer desires the item. In reality, gold jewellery will sit in stock for longer periods than gold coins or bars, depending on how niche the item is, affecting the dealer’s cost of carry.

For this reason, many jewellers will choose to melt down items they purchase from the public to refabricate into new items, or simply to sell as scrap gold. The cost of doing this will be built into their buy price, thus lowering the value of your gold.

When you buy gold jewellery, you’re not just paying for the gold content—you’re also covering:

• Making Charges: These include labour, design, and craftsmanship fees, which can add 10-30% or more to the price.
• Brand Premiums: Luxury or designer jewellery can cost far more than its raw gold value due to branding.
• Retail Markups: Jewellers add profit margins that increase the purchase price.

Gold jewellery is labour-intensive, requiring skilled craftsmanship, design work, and sometimes gemstone additions. It’s unlikely to receive such premiums when selling your items, especially if the buyer intends to simply melt down the piece for re-use.

Gold bullion and coins, in contrast, are priced closer to the actual gold spot market rate, with only a small premium for minting and distribution.

To create attractive gold jewellery that boasts stunning designs, there’s unwanted gold that’s removed and discarded as scrap. However, the customer, i.e. you, still have to pay for this.

So, you’re paying for gold that doesn’t actually come to you. Wastage charges may be as much as 5 to 7% and could vary with each job. Interestingly, as most jewellery is crafted today using precision technology and high-quality machines, not a lot of gold should actually be wasted.

But jewellers continue to charge customers ‘wastage charges’ as a percentage of the actual cost of making the jewels. It’s also important to remember that gold, as a precious metal, can simply be melted down and used again by the jeweller. So, in essence, the customer ends up paying for gold that the jeweller reuses.

Gold bullion consists of 24 karat gold, usually 99.99%, while coins contain either 22 or 24 karat purity levels. The choice of some coins to be made in 22 karat is to make them more resilient to scratching and wear & tear, further preserving their resale value. It’s important to understand that when buying or selling coins such as Sovereigns or Krugerrands which are 22k, prices are always based on ‘pure gold weight’ only. You don’t pay for the alloys.

Our automated portfolio creator will help you choose the ideal selection based on your budget and objectives.

If investment is your motivation for buying gold, then tax implications will have a significant impact on your returns. Tax can be viewed in three possible stages. Tax when you buy gold, tax when you hold gold, and finally tax when you sell gold.

Value Added Tax (VAT)

Value Added Tax (VAT) is added to most products and services at a rate of 20%, unless the particular goods have an exemption. Luckily, an exemption exists for ‘Investment Grade Gold’. To qualify gold needs to either be in the form of coins or bars and be of a minimum purity of 22 karats. That means that all gold bars and most gold coins will be VAT-exempt to purchase. In contrast, gold jewellery is not exempt, regardless of purity, so investing will incur a 20% charge upon purchase. This VAT won’t be received back, so essentially you begin your quest for profits 20% down from the start.

Tax on Income or Dividends

Unless you’re lending out your gold bullion or jewellery in return for a charge, then no income or dividends will be received when you hold physical gold of any variety. Therefore, no tax will be incurred while holding these assets. Some forms of electronic gold, such as ETFs and mining shares, could generate dividends, consequently incurring additional tax.

Capital Gains Tax (CGT)

Finally, tax may be applicable when you sell your gold. CGT only applies if you’ve made a profit so selling at a lower price than when you bought will be a tax-free loss! Each individual is currently permitted a £3k total capital gain per tax year before the tax kicks in. But this encompasses all assets. So if you’re selling some stocks, property, or other assets too, then this may take up your tax free allowance before your gold gets a look in.

However, a loophole exists which means that UK residents can buy and sell certain gold coins without being liable for ant CGT. Certain coins are classified as legal tender, due to their UK face value, and won’t be taxed for any gains whatsoever.  Unfortunately, gold jewellery doesn’t enjoy such benefits, so any profit you make will be taxable at 18-28%.

One of the biggest differences between gold jewellery, bullion bars, and coins as investments is how they hold up over time. Since gold is a soft metal, it can be prone to scratches, dents, and other forms of damage, which can affect its resale value—especially in jewellery.

• Moderate risk of damage – While coins aren’t worn like jewellery, they can still get scratched or nicked if not stored properly. 24 karat coins scratch easier then 22 karat productions such as Krugerrands and Sovereigns.
• Handling marks matter – Collectible coins (numismatic value) lose worth if they have scratches or handling marks, but standard bullion coins are less affected.
• Storage solutions minimize risk – Keeping them in protective capsules or sealed pouches helps maintain their pristine condition.

• Least exposure to damage – Gold bars are usually stored in vaults, safes, or sealed packaging, minimizing handling and physical degradation.
• Protected from wear – Since bars are not meant to be touched frequently, they retain their original condition better than jewellery or coins.
• Resale value remains highest – As long as the bar’s certification and purity markings remain intact, its value is rarely affected by minor scratches.

If your main goal is financial growth, gold bullion or coins are by far the better option due to lower margins, better liquidity, and the possibility of being tax-free.

However, if you want an asset which you can wear and enjoy, gold jewellery offers both aesthetic and sentimental value, making it a more personalized form of investment. Jewellery is not the most efficient gold investment, but it can still be valuable—especially when bought wisely (low making charges, high purity, etc.). If you’re looking for pure wealth preservation, bullion and coins are better choices.