Is Buying Gold a Smart Move? Where Can I Unload My Gold Jewelry?

By Joseph Nicholson

Is Buying Gold a Smart Move? Where Can I Unload My Gold Jewelry?

Desconocido (CC-By-SA 3.0)
By Joseph Nicholson

OverviewIf you’re a saver, if you put away some money every year for retirement or a rainy day, gold is probably an investment that has been on your mind. From 2005 to 2008, gold outperformed the stock market, and these were years that were generally considered quite good to be in stocks. Of course, whether buying gold is a smart move or not will depend on your personal situation and the current trends in the markets and economy. In general, however, gold has an excellent track record of helping people who save money protect their purchasing power.AllocationEven the most conservative financial planners generally recommend at least 10 percent of your investment portfolio be allocated to precious metals. Along with platinum, palladium and silver, gold is an important part of that allocation. But certainly, some investors hold more than 10 percent in precious metals, or gold in particular. If you don’t have an investment portfolio per se, but have some savings, a general rule of thumb is that for every $10,000 you have in savings (or net worth if you want to be more aggressive) purchase 1 oz. of fine gold.InflationGold is one of the best hedges against inflation. It’s a simple idea–as the supply of money goes up, its value goes down. And, as the value of money declines, prices of real-world things goes up. Unfortunately for most people, wages and salaries don’t tend to keep up. The end result is that over time, because of inflation, people become poorer and have to work harder, and their savings purchase less and less. But, because investors use gold to hedge against such movements in the dollar, and their purchases send the value of gold up, a person who has part of her savings in gold will not experience as dramatic a reduction in her savings.Better Than BreakevenOf course, if you only hold onto your gold, you’ll only just about break even. Eventually, inflation works its way through the economy, and the cost of living eats up any profits you might have had on your gold. While this is still better than losing purchasing power, one of the best reasons to buy gold is that it is sensitive to inflation and reacts more quickly than, say, prices at the grocery store or the car lot. This means if you sell your gold near its peak and transfer that money into assets that have not yet appreciated, you can actually do a lot better than breakeven.ValuingGold is the first global currency. Its value is accepted in every major country and is generally considered a fairly liquid asset (certainly much more so than a house). The value of your gold depends on two things: the purity of the gold and its weight. Twenty-four K (karat) gold is 99.9 percent pure and is generally considered too soft for use in most jewelery, which is between 9 (37.5 percent pure) and 18 (75 percent pure). If you know the purity of the gold, you can multiply this amount (as decimal) by the weight of the jewelery to calculate the total amount of actual gold in the piece. You can then use the market price of gold to find the melt value for your item.UnloadingWhen it comes to unloading your gold jewelry, or any other gold for that matter, the most important consideration is to get the best price. Think locally first because this will prevent having to pay shipping. Believe it or not, many pawn brokers and small, storefront gold traders understand the value of gold very well and offer fair deals (about 5 percent below the melt value is reasonable). The traveling shows that advertise in your local paper asking you to sell them your scrap gold, on the other hand, rarely give you full value for your jewelry. If you cannot find a good local broker, consider selling to a recognized broker like Kitco (see Resources). Though it can take longer to get your cash, you’ll at least be treated fairly. Another option is to try your luck with an online auction site, where good-looking pieces at least have a chance of attracting higher prices from buyers who will use your item as jewelry rather than an investment.ResourcesreferenceGold PurityresourceKitco

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