For the love of gold
(Don’t) put a ring on it
Is gold jewellery going out of fashion?
You’ll never get what you paid for it
Devaluation: Synthetic diamonds, 3D Printing and Rise of the machines
Buy gold – No one has cracked alchemy
Give the gift of real gold – They will thank you for it

For the love of gold

The first line of one of the oldest known Valentine’s reads

Je suis desja d’amour tanné or I am already sick of love

The lines were written in the 15th century by Charles, Duke of Orleans to his wife from the Tower of London and tragically the duchess died before the poem could reach her.

It is a funny line to start with in a love poem, but one that perhaps many of us can relate to at this time of year.

Everywhere we look there is a sea of red. Hearts and apparent expressions of love adorn shop windows, supermarket shelves and adverts on the television. The marketeers tug at our heart strings. It can all get a bit much for even the most romantic amongst us.

They say you can’t put a price on love, but at this time of year many have a darn good go at it. It’s February which means Valentine’s Day is here and we are guilt tripped into either feeling awful that we are single or that we don’t know what to buy the person we love.

A whopping 80% of Americans who are dating, engaged, or married celebrate Valentine’s Day, according to time.com. And like, I suspect, their European counterparts, they go all out when it comes to celebrating.

According to the US’ National Retail Federation, spending this Valentine’s is estimated to fall this year, estimated to be down to $18.2 billion from $19.7 billion. 2016 was a 10-year high, whilst this year is expected to be a 3-year low. The average spend on Valentine’s in the United States in 2016 was $196 by men and $100 by women.

It isn’t so surprising when you look at the climb in prices, year on year. If you want to see a real example of inflation, look no further than the By My Valentine Index created by bankrate.com. It shows that this year the cost of buying a basket of Valentine’s gifts will cost you $580.98. The price has climbed significantly from the 2016 Index of $512.02.

So it is not surprising that less of us are spending this year, but a three year low is quite a drop. So what happened? Are we not feeling the love, or are the harsh facts of reality setting in?

Times are tough both politically and financially and lovers are perhaps realising there’s no money to waste and instead things of real meaning and value should be bought – like unforgettable holidays, precious hours with loved ones and beautiful memories.

(Don’t) put a ring on it

What if you’re reading this and thinking that you’re way ahead of us and already planning on buying precious metals for your loved one and have a nice ring or necklace in mind. To that I would say not so fast, jewellery, or jewelry for our American friends, is not the answer here.

Fundivo.com estimates that $19.7 billion was spent by Americans on Valentine’s Day last year, $4.5 billion of this was on jewellery, the most spend in any category. (Somewhat depressingly $681 million was spent on Valentines for pets).

According to entrepreneur.com, 50% of proposals happen on Valentine’s Day. Which, to be honest, seems to be a bit of a cop out. There are 365 days in which to surprise your loved one and you pick the one day of the year that it is most likely to happen. But I digress.

You may be thinking that compared to other items in the Valentine’s basket, jewellery is a win-win. Not only will your loved one be delighted but you will also have made a wise-investment. Especially compared to something like chocolate … given cocoa prices are down on last year.

Chocolate gets eaten and when it’s gone, it’s gone. You can’t eat gold as Nouriel Roubini used to tweet a bit. You can use gold gold to buy water, food, a shop, animals or indeed your own farm to produce food.

As much as it breaks my heart to write this (and hope that my significant other isn’t reading) jewellery is actually not a great investment. I would argue that you would be far better investing your money into physical gold than a trinket that happens to be made from it.

My reasons for this are three-fold. First demand for gold jewellery is declining, second the jewellery industry is under threat and thirdly and perhaps most importantly the resale value of jewellery is always appalling … unless you own some famous beheaded Queen’s wedding ring.

Is gold jewellery going out of fashion?

First of all there is the demand factor, demand for jewellery whether as a gift or an investment is down across the globe.

In a year when gold investment was at a four-year high, gold jewellery sales fell to a seven-year low in 2016, to just 2,041.6t according to recent WGC data, a fall of 15% worldwide. Whilst the final quarter of the year saw 26% growth in the sector, thanks to the sharp fall in the gold price.

But in the West demand for jewellery did not perform so well, writes the WGC:

“The mild upward trend in US jewellery consumption came to an end in 2016: demand slipped 1% to 118.3t on weakness in the second half of the year…Q4 and full-year demand in Europe followed similar patterns: France and the UK underperformed broad stability elsewhere. In France, 2016 jewellery demand softened by 4% as consumer confidence was undermined by security concerns and increasingly divergent domestic politics. In the UK, the tentative gains made since 2012 came to a halt. Post-Brexit uncertainty and pessimism affected consumers; Q4 demand fell 5% to 12.2t, leading to a 3% drop in annual demand to 25.2t.”

Consumers globally are waking up to the rip off that is jewelry. They are becoming more sophisticated and “moving up the value chain” and opting to buy gold coins and bars rather than trinkets and bangles. This is especially the case in India, China and Asia.

You’ll never get what you paid for it

It is estimated that the markup on a diamond wedding and engagement ring is between 300% and 1000%, with a tendency towards the lower end of the scale. The chances of us seeing this back are unlikely in the extreme as a buyer will only take into account the components of the jewellery rather than the purchase price.

We talk about gold as a form of insurance. During times of inflation, and especially hyperinflation you will be looking for the financial insurance to protect your wealth. In both economic and political times of difficulty, gold is the best form of financial defence. Making an investment in jewellery is a false economy given you won’t see a financial return and there is no protection from economic dislocations as it is not liquid and there is no liquid market to sell jewellery at a fair and transparent market price.

The price we put on jewellery is not just based on the original price that we paid for it, but also the sentimental price. This is unfortunately not appreciated by the buyer should you ever come to resell it.

And, let’s be honest you are going to be far more willing to sell your gold coins and bars than the engagement ring that is valuable only to you and your family.

Unlike jewellery, the value of bullion is not subject to personal tastes. And unlike with gold, there is no unified market price for diamonds.

It is also notoriously hard to resell a diamond, Edward Jay Epstein described in 1982, “To make a profit, investors must at some time find buyers who are willing to pay more for their diamonds than they did. Here, however, investors face the same problem as those attempting to sell their jewelry: there is no unified market in which to sell diamonds. Although dealers will quote the prices at which they are willing to sell investment-grade diamonds, they seldom give a set price at which they are willing to buy diamonds of the same grade.”

Just to put into perspective, one ring, on average will cost $5,200, the same amount it would cost you to buy just over 4 oz (according to prices on the 9th February). A troy ounce is around 31g. There is approximately 5g of gold in an engagement ring. So for the same amount of money you could buy 130g of gold.

Gold, in contrast to gold jewellery has held it’s value throughout history. Yes, the price has changed, but the value has remained constant.

Devaluation: Synthetic diamonds and Rise of the machines

But the issue with jewellery is not just about resale value or buying trends. The fact is, the jewellery sector as we know it is under threat.

Even though the technology for synthetic diamonds was first patented in the 1950s (by Lockheed Martin) it is only in recent years that it has become sophisticated enough to play a major role in the jewellery market. Synthetic diamonds are chemically and physically the same as natural diamonds. It is near impossible for experts to tell the difference given they are the same composite.

It is estimated that in 10-15 years time lab-grown diamonds will be a real threat to the mined diamond industry. They are currently 20 – 30% cheaper than mined (or natural) diamonds. For example, a 0.50 carat can range from $500 to $2,500, while a 1.00ct from $2,000- $8,000.

Between 2016 – 2018 mined diamonds are expected to see a shortfall in supply versus demand. With this in mind we can expect to see the discount increase upwards to 45% on synthetic diamonds. Imagine the difference in a decade’s time when the technology is even more refined.

Currently purists try to dismiss the potential market size of synthetic diamonds arguing that it’s more romantic to have a diamond that took millions of years to form. I would contend a diamond is a diamond and if one has been grown especially for you then that’s really romantic. And sensible.

Granted, it is unlikely that we are going to see auction houses putting synthetic diamonds up for bids, but how many of us were intending on buying diamonds that would end up in such a place anyway? When it comes to a bar of gold there is no stress in worrying about what the market looks like in terms of fashions, technology and perceived value.

It isn’t just lab-grown diamonds that are threatening the huge industry, 3D printing also poses a threat.

By 2020 3D printing in jewellery markets is expected to be $11 billion by 2020, this poses a threat to artisan jewellers and the value of pieces produced by the big name jewellers found on Bond Street and Mayfair.

There is no longer a need to spend a small fortune on a sparkly number, when a machine is able to mould and design the perfect item at a fraction of the cost.

So when it comes to the jewellery industry we can no longer reassure ourselves that what we buy will hold its value at a time when technology is usurping one of the few things that gave it any value – being carefully crafted and handmade.

Buy gold – No one has cracked alchemy

At the time writing one of life’s biggest mysteries still remains – how can man make gold?

The fact is, we still can’t. Gold cannot be created with technology. Diamonds, yes. Chocolates, yes. A nice meal, certainly. Jewellery, just get yourself a printer. But gold remains one of the last mysteries yet to be solved by humans.

Gold can be improved to suit its purpose through technology (to make gold solar panels, gold leaf etc) but gold is gold and very little can be done to affect its value, as history has shown.

Unlike other components of jewellery, gold has remained a safe haven for thousands of years. It has repeatedly shown its value and worth through countless financial and geopolitical crises.

What better expression of love than to give actual gold – something that has stood the test of time, weathered all problems and continues to be desired around the world?

We’re not saying that you shouldn’t treat the one you love this Valentine’s Day, or in fact any day (why the excuse?) and you should buy an engagement ring for your big day.

But, when it comes to making the decision of a life time we argue your wealth is better placed in something simple and time-tested such as a bar or coin of pure gold.

If you are planning to give your loved one something golden this Valentine’s day, consider giving them the gift of real gold with GoldSaver. That way they own real, pure 24 carat gold bullion in an extremely safe way.

Saving is never as sexy as splurging on shiny things but delayed gratification is important and by saving in gold now your better-half will be able to afford many more luxuries – whether they be nice meals, great holidays or perhaps some 3D printed shiny trinkets in the coming years.

Oscar Wilde wrote

“I have the simplest tastes. I am always satisfied with the best. And sometimes, only the best will do – it’s that simple.”

Gold really is that simple and it really is the best.

What more could your loved one ask for this Valentine’s Day?

Gold hovers near three-month highs; political uncertainty provides support (Reuters.com)

Gold settles higher, extends rally to a fifth day in a row (MarketWatch.com)

Gold Reaches Three-Month High as Buyers Flock Back to Top ETF (Bloomberg.com)

Stan Druckenmiller seems poised to make a killing on gold (MarketWatch.com)

Investigators Probing Plane That Got Too Close to Air Force One, Sources Say (Bloomberg.com)

What if India and China buy gold as Americans lose faith in dollar assets? (FT.com)

Gold continues to be safe haven in these uncertain times (MiningWeekly.com)

Seth Klarman Warns Trump’s “Erratic, Overconfidence” Could End Dollar Hegemony (ZeroHedge.com)

Dollar Breaks below 100 with Rising Yields, is Wholesale US Treasury Dump Coming? (ValueWalk.com)

US government’s 2016 net loss “more than doubled” to NEGATIVE $1 trillion (SovereignMan)

Gold Prices (LBMA AM)

09 Feb: USD 1,241.75, GBP 988.18 & EUR 1,161.04 per ounce
08 Feb: USD 1,235.60, GBP 989.47 & EUR 1,160.10 per ounce
07 Feb: USD 1,231.00, GBP 995.14 & EUR 1,154.43 per ounce
06 Feb: USD 1,221.85, GBP 978.34 & EUR 1,138.15 per ounce
03 Feb: USD 1,214.05, GBP 970.93 & EUR 1,128.99 per ounce
02 Feb: USD 1,224.05, GBP 966.14 & EUR 1,131.88 per ounce
01 Feb: USD 1,210.00, GBP 960.01 & EUR 1,122.03 per ounce
31 Jan: USD 1,198.80, GBP 964.91 & EUR 1,119.20 per ounce

Silver Prices (LBMA)

09 Feb: USD 17.71, GBP 14.10 & EUR 16.58 per ounce
08 Feb: USD 17.74, GBP 14.20 & EUR 16.66 per ounce
07 Feb: USD 17.60, GBP 14.21 & EUR 16.49 per ounce
06 Feb: USD 17.60, GBP 14.10 & EUR 16.39 per ounce
03 Feb: USD 17.28, GBP 13.84 & EUR 16.10 per ounce
02 Feb: USD 17.71, GBP 13.95 & EUR 16.38 per ounce
01 Feb: USD 17.60, GBP 13.91 & EUR 16.29 per ounce
31 Jan: USD 17.29, GBP 13.86 & EUR 16.07 per ounce

http://www.goldcore.com/us/

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 -- Published: Thursday, 9 February 2017 | E-Mail  | Print  | Source: GoldSeek.com

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