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precious metals investment

The relationship between the price of gold and the price of your jewellery

Those who invest in gold jewellery are naturally curious as to how the market affects their gold jewellery’s price. Depending on the purity of your piece, the relationship between a fine piece of gold jewellery and its price can either be very simple or deceptively hard to establish.

As the value of gold rises or falls, there is usually a price shift in your jewellery, too. However, many factors come into play when determining jewellery price – many of which we explore in this article. You need to understand these to price your jewellery confidently.

How is gold jewellery priced?

Gold jewellery, for the most part, is priced according to the creativity, workmanship, and exclusivity of an individual item. Stock items, such as engagement rings and earring mountings, tend to be the pieces of gold jewellery that best and most accurately reflect gold-ounce prices.

Now, because gold is also primarily a commodity, there is an international market for the metal, which includes publicly updated and published prices. This price changes daily and always in quick response to crises, minor or major, in the world. Because of this, its fluctuations can be both unpredictable and volatile. In conjunction with these fluctuations in gold price, the price of jewellery containing high volumes of gold tends to travel with the market price of the metal.

The jewellery industry operates essentially on a “gold price on date of delivery” ethos. This means that manufacturers, wholesalers, and retailers don’t know from one day to the next what their gold purchases or unfilled orders are going to cost them. When a supplier eventually fills the order, the daily gold price is consulted before the metal is priced accordingly.

Retailers do their best to adjust store prices to accommodate the unpredictability of their inventory’s value. Still, they are restricted by customers being resistant to higher prices and constant changing of prices. As a result, many jewellers tend to price their merchandise at a particular level that will ensure they’re protected – to a point – against large shifts in the gold price.

As long as international gold prices remain below a jeweller’s own threshold number, the retail prices in that store will tend to remain constant. But at the same time, they’re understandably reluctant about cutting prices. After all, prices could just as easily shoot up again the following day, resulting in the jeweller having to change their price again.

This event would understandably come as much of a concern to the large percentage of customers choosing to hold back when prices are unpredictable. They would justifiably reason that it might be best to hold off to see if the price drops the following day, and in the event that it does, it might be best to wait even another day (or two) to see if the trend continues.

Although these to-be-avoided price games between a jeweller and prospective customers do allow the customer the luxury of a long wait, they also have the potential to send the jeweller spinning into bankruptcy.

Price fluctuations

As you perhaps already know, the price of gold is set daily in the London Gold Market, where huge transactions between corporations, institutions, governments, and individuals take place. Here, buyers and sellers play an integral role in establishing the price according to supply and demand. With the metals themselves being the foundations of jewellery pieces, it’s easy to understand the bigger picture of the effect of gold supply and demand on jewellery.

The different amounts traded and prices paid during all transactions play a part in the price fluctuations. At the end of the day, gold’s final prices are first averaged before finally being published. This gold publication is recognised through the familiar announcement, “Today, gold closed on the London exchange at (such an amount)“.

A daily price quote is easily obtained from banks, commodity brokers, coin and precious metal dealers, or online. Outside of that, it’s also easily accessible for anyone from the financial pages of a daily newspaper. This figure is based on the sale of large 400-ounce (27.4-pound) bars, which are known affectionately as the “Good Delivery Bar”.

Good Delivery Bars

Good Delivery Bars represent the universally recognized medium of exchange between large banks, and even entire nations. They are the biggest bars that exist for monetary purposes, containing a purity of .995 gold.

For bars holding this status, there is essentially little or no premium charged on their sale. Any amount of gold sold or purchased smaller than one Good Delivery Bars will always include some kind of premium, commission, or brokerage fee, which is added on top of the basic gold price.

Smaller bars come in a 100-ounce size (roughly 6.85 pounds), although the most popular seem to be the 1-kilo bars of 32.15 troy ounces (roughly 2.2 pounds). As is the case with the 100-ounce bar, the 1-kilo bars are produced in several grades of purity, from .995 up. There are a variety of bars which refiners produce, ranging in size from a single ounce up to 10 ounces.

All of these bars, regardless of their size, are stamped with a mark that displays their fineness, weight, and registration number. Some refiners, as well as some banks, will also add their names when issuing a bar.

It is generally regarded as prudent for an investor to ask for an assay of a bar removed from a bank storage vault to be sold later. Because many investors wish to get into the gold market less expensively, many small gold bars, wafers, coins, etc. are available to be bought and sold. The sale of these items is conducted by a range of establishments, including banks, coin shops, department stores, mail-order houses, and jewellers.

About 24-karat gold jewellery

Here’s an interesting piece of relatively unknown information about small 24-karat jewellery investment items. When these items weigh less than half an ounce, they are commonly just marked 24 karats – but without a percentage of fineness. Without a fineness stamp, the item is automatically shifted out of the money category and into the jewellery category. This would mean that, unfortunately for the wearer of the jewellery, the gold price wouldn’t be applied to the piece.

The markup here is also usually quite stiff, commonly two or three times the actual price of gold. This is due to the price of the associated craftsmanship, which is slapped on top. However, at 7879, we price our 24-karat gold jewellery items by their weight and based on real-time market value. This results in you always getting the best price for your piece, at any given moment.

The advantage of buying 24-karat gold investment items is that they have a better chance of appreciating in value than items of other karat amounts, which are always alloyed with less-expensive metals.

Re-selling gold jewellery

As the general price of gold fluctuates, so does the selling price of gold accordingly.

Small amounts of gold can be sold directly for immediate payment to a number of buyers, with their identity and availability easily located online, in the daily newspaper, or in the Yellow Pages. Your best outlet here would be a jewellery store, jewellery supply house, coin dealer, precious metal buyer, or, if you can locate a willing one, a small refiner.

Refineries generally aren’t too interested in buying a quantity smaller than 100 ounces, as that seems to be their profit break.

It should go without saying that your best price will come from a reputable – and probably local – dealer. Also, at the end of the day, your best protection against an inaccurate buying or selling price is still your own knowledge.

You should begin by arming yourself with the knowledge of how to weigh gold, being able to recognise the vocabulary of gold dealing, and knowing how to test gold for its purity. Once equipped with these skills, you’ll see when a reasonable price is offered.

On top of all this, you should also approach gold with a reasonable attitude. When buying gold in a smaller volume than a Good Delivery Bar, there is no realistic way to buy gold at the London Price. You should always accept that you will have to pay a premium. This premium will reimburse the middleman for his time, talent, risk, and investment. Whether that’s a precious metal dealer or a jeweller, they are entitled to a fair profit.

If gold must be refined or worked in any way, there is a refiner and craft charge for that work. This will also be an add-on to the price of the piece. For these reasons, you should always be prepared to pay more than the daily price.