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Save your gems: why gold and not diamonds.
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You've heard the stories about gold prices being high (currently $868 an ounce). You've seen the ads to sell back your gold. You might have heard about gold parties where guests sell their gold.
But what about diamonds?
This week, Marketplace reports on the downward sales on diamond jewelry. It is of little surprise that sales of expensive jewelry are down, but why would the price of gold be high, but the price of diamonds be low?
Gold is purchased as a way to protect against inflation. Even if your dollars buy you less, you can hold onto your gold. The dollar value of the gold will go up with inflation while the value of a given dollar drops. One would expect a similar result with diamonds.
Diamonds are not as versatile as gold. While gold can be melted down and reworked into new shapes, diamonds remain whatever shape they were cut into in the first place. And diamonds are hard to value. Unlike gold, which requires only a couple measurements to find out how pure it is, diamonds need to be inspected by experts. The end result is, while diamonds "are forever" just like gold, they are not as convenient and certain. What results is stockpiles of diamonds and fancy jewelry while the gold settings are sent off to be melted down, leaving the gems behind.
So while this might be a decent time to sell gold, it is not a good time to sell your precious gems. There are already more out there than consumers want to buy. But it might not be a bad time to invest in jewelry, especially if you are in a position to, and even more so if you enjoy jewelry. You can get good deals on pre-made jewelry and you may be able to purchase say, a nicer engagement ring than you might have managed a year ago, heavy on the stones and low on the precious metals. It's anyone's bet whether gems are gong to be a good investment on their own, but it's a good time to buy if you're interested.
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