This 1 industry has been thrown into ‘chaos’ with the price of gold rising over 50% this year — here’s how you can invest for shiny profits as well

Considered a safe haven in turbulent times, gold has crossed a significant milestone, coming in at US$4,000 per ounce for the first time in early October.

Turmoil in the U.S. and related concerns about the stock market and the economy have been fuelling the commodity’s rapid rise since last year. Although the price saw a reversal in recent days, some investing experts say it’s still a buy, and there has been a rebound.

“It got ahead of itself, no doubt about it,” said Kevin Smith of Crescat Capital hedge fund to Bloomberg (1). “Given the still unsustainable debt and deficit imbalances that we have in the U.S. and most of the developed world, it’s still a very favourable fundamental backdrop.”

Legendary hedge fund founder Ray Dalio has said that the current economy closely mirrors that of the 70s, when there was high inflation, and urged investors to hold 15% of their portfolio in gold.

Goldman Sachs sees the price reaching US$4,900 per ounce by the end of 2026.

However, while investors put money in gold, there’s one group of traditional buyers of the commodity who are struggling: Jewellers.

For both mass retailers and small business owners, the sky-high prices of gold are cause for concern, and many jewellers are changing their strategies or considering a shift to less expensive materials.

Here’s what the new race to the top for gold means for your favorite jeweller, and what you should know about this precious metal if you’re considering investing in it.

The cost of jewellery

CNBC reports that major retailers like Mejuri, Pandora and Signet are changing their strategies: exploring alternative manufacturing methods and streamlining supply chains, but price hikes seem inevitable for the brands (2).

“The last month has been chaos, pure chaos,” said David Hakimian, owner of DEH Jewelry Solutions in an interview with The Wall Street Journal in May. “It’s affecting pricing dramatically (3).”

He said some designers were considering changing from using 18-karat to 14-karat gold. There is also the opportunity to sell gold plated jewellery that preserve the look of their brand’s designs.

“We’ve actually seen a really huge increase in interest in demi-fine,” BaubleBar co-founder Daniella Yacobovsky told CNBC. “I think that it offers people a really fantastic alternative to solid gold. … You’re going to get a really fantastic quality similar to that for a lower price point.”

While consumers may either opt for lower-cost gold plated pieces or look at their gold jewellery buys as an investment, the rising price may ultimately affect the market and shut out all but the ultra-wealthy. Even silver jewellery may take a turn — prices leapt from around $40 USD per ounce in early September to more than US$54 in mid-October.

Colin Nash, president of the Canadian Jewellery Group and owner of Nash Jewellers, told The Canadian Press that, based on the traffic of his business, consumers are still spending money on jewellery, just less.

“I think that we’re still going to get the traffic, it’s just a question of how much and what are they going to be buying” Nash said (4).

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How to invest in gold

While investing in gold jewellery is one way to get in on the gains in this commodity, it’s not usually the best way to realize value.

For investors who want to ride the wave of this upswing, consulting with a qualified financial advisor before making any moves is the best bet before buying any new kind of investment, no matter how solid it looks right now. Investments should always be made with an eye to your long-term financial goals and your risk tolerance.

Investors have three main paths for gold investments: Directly holding physical assets like gold bars or bullion, buying stocks in companies that mine gold, or buying a gold ETF that tracks the price of gold. For average investors, indirect investments in stocks and ETFs are usually preferred since you can avoid security and storage costs.

Gold ETFs

Gold ETFs have a number of advantages, including the ease of buying and selling, the low fees — sometimes just 0.10% — and a low price of entry compared with buying physical gold. You can get direct exposure through investments in shares of physical gold bullion, or investments in gold-mining stocks.

Gold mine shares

Gold mining company stocks rise with the price of gold. However, the performance of the company is also a factor in the price of their stock — as with other types of stocks, a hit to the company’s reputation or an increase in production costs can impact its share performance. As with buying any individual stock, it’s important to understand historical performance, leadership at the company and market context before you buy.

Physical gold

Physical gold may seem like an attractive investment for many reasons, but average investors may find it tricky to hold. In addition to the high entry price, physical gold comes with storage fees for security. Bullion and bars are illiquid, meaning they are tough to buy and sell quickly. While some investors opt for gold coins for greater liquidity, buying requires a lot of research, including finding a reputable dealer.

Gold jewellery

While about 49% of all global gold that's mined is used for jewellery, the markup on can be significant, as the price also reflects a company’s operating costs, marketing and the cost of designing and manufacturing the piece. Therefore, it’s not always possible to realize a good return on this investment, especially for mass market designs. Most collectors consider investment in jewellery a speculation, like with fine art and other alternative assets — meaning you must know the market and devote significant time to research.

Article sources

We rely only on vetted sources and credible third-party reporting. For details, see our editorial ethics and guidelines.

Bloomberg (1); CNBC (2); The Wall Street Journal (3); City News (4)