FINE JEWELRY AS A PURCHASE

If you buy massmanufactured jewelry, the cost of design and workmanship is spread out among all the pieces of jewelry of that design. You are also playing for increases in cost along the sales chain until the jewelry reaches you. The manufacturer, the wholesaler, and the jeweler all increase the actual original cost to allow for their overhead, costs, "d for their profit. In short, each step along the way in turning .pure" gold into karat gold, for example, and karat gold into jewelry increases the cost of the jewelry and lessens the value of the gold in comparison to the cost of the jewelry.

To put it another way, say you buy an 18-karat gold ring for $700. The ring may be worth $700 because of design and craftsmanship, but as gold it is worth only 75 percent of the market price of gold. If gold is selling at $400 an ounce and the ring weighs an ounce, the gold is worth only $300, with $300 covering the cost of making -e ring, overhead, and profit.
Granted, you may be able to sell the ring for the $700 you paid for it, or even more. That means you must find a "willing buyer," a buyer willing to purchase it at or above the price you paid. If you take -e ring to a jeweler to sell it, however, despite its being in mint condition, chances are you will get only about $350, the wholesale price, or less. A jeweler will pay you only the amount of money for which he can get an equivalent ring.

If the design or condition is such --at he can't resell it at the price you paid for the ring, you may get only the price of gold, or $300. Gold, therefore, would have to more than double the market price of $400 an ounce for you to get back even what you paid. If you keep the ring long enough, the price ova gold may raise that high. People who bought gold jewelry when the price of gold was stabilized at about $35 an ounce could probably get back many times what they paid. In the meantime, though, the gold is not paying interest or dividends. It may even be costing you money in the form of insurance and a safe-deposit box to protect your "investment."

Gold in the form of coins, such as the South African Krugerrand the most popular coin, is another matter and beyond the scope w this book. For your information, however, Krugerrands are 22-karat or .916 gold. If these or any other coins are used in jewelry, the . become jewelry and subject to the same cost inflation as all jewel r. The same considerations hold true for jewelry with gems.