Why Gold Jewellery Is a Poor Investment (And What to Buy Instead)

Gold has preserved purchasing power for millennia, and in much of the world it is bought precisely for that reason — as a store of value that survives currency crises, as a wedding gift that doubles as a savings account, as wealth you can carry.

All of that is true of gold. Rather less of it is true of gold jewellery, and the gap between the two is where a great deal of family wealth quietly disappears.

The two costs nobody mentions

When you buy a gold necklace, you pay for three things: the metal, the craftsmanship, and the retailer's margin. When you sell it back, you are paid for one: the metal. Sometimes slightly less.

That asymmetry has two components.

Making charges. The cost of turning raw gold into a wearable object. These typically run from around 8% on a machine-made chain to 25% or more on intricate handworked pieces, and on branded designer jewellery they can exceed the metal value entirely. They are entirely lost on resale — nobody buying scrap gold pays you for the artistry.

The buy-back spread. Dealers buy below the day's rate and sell above it. That gap is their margin, and it applies in both directions.

The round trip, with numbers

Suppose gold is at 250 per gram for 22K, and you buy a 20 gram chain with a 12% making charge:

• Metal value: 20 × 250 = 5,000
• Making charge at 12%: 600
• You pay: 5,600

You sell it the next day. Gold has not moved. The dealer pays metal value less a 3% spread:

• Metal value: 5,000
• Less 3% spread: 4,850
• You receive: 4,850

You have lost 750 — 13.4% of what you paid — on a day when the gold price did not move at all. Gold now has to rise 15.5% before you are back to breaking even.

Buy the same value as a bullion bar with a 2% premium and a 1% buy-back spread, and the round trip costs you around 3%. Gold needs to rise 3% to break even instead of 15.5%.

What this means over time

Over a long holding period the drag matters less, because gold's appreciation eventually swamps a one-off 13% cost. Jewellery bought in 1995 and sold today has almost certainly made money.

But it has made less money than the same weight of bullion bought on the same day — permanently and irrecoverably less, by roughly the making charge. And for anyone who buys and sells within a few years, the making charge can consume the entire gain.

The karat question

Higher karat means more gold and less alloy. 24K is pure and too soft for most jewellery; 22K is 91.7% gold; 21K is 87.5%; 18K is 75%.

For a piece bought partly as a store of value, higher karat is better — you are buying more metal per gram of weight, and less of whatever the alloy is made of. This is precisely why 22K dominates in India and Pakistan and 21K across the Gulf, while 18K and 14K dominate in Europe and North America where jewellery is bought as adornment rather than savings.

It also explains a common disappointment: someone brings a 14K piece bought in the United States to a dealer in Dubai and is startled by the valuation. It is not a bad valuation. The piece is 58.3% gold.

So what should you buy?

It depends entirely on what you actually want.

If you want an investment: buy bullion — bars or coins of 999 purity from a recognised refiner. Low premium, tight spread, universally liquid, and in several jurisdictions treated more favourably for tax than jewellery. Both the UAE and Saudi Arabia, for instance, zero-rate investment-grade gold of 99%+ purity while taxing jewellery at the full rate.

If you want jewellery: buy jewellery, and buy it because you want to wear it. There is nothing wrong with that. Just price the making charge as what it is — the cost of an object you enjoy — rather than telling yourself it is an investment that will be recovered later. It will not be.

If you want both: favour plain, high-karat, machine-made designs, where making charges sit at the bottom of the range. Ask for the metal value and the making charge as separate lines on the invoice — a reputable jeweller will provide this without hesitation, and the request itself tends to improve the number you are offered.

Before you walk in

Know the metal value of what you are about to buy. It is the floor beneath every negotiation, and it is the one number the shop cannot argue with.

Our gold price calculator gives live metal value by karat and weight in 160+ currencies, and we publish local rate pages for the UAE, Saudi Arabia, India and Pakistan.