Gold will always be gold but how it is used affects its value and what is expected of it. For consumers gold often means jewellery, watches and decorations. For banks, central banks, and investors, gold is above all an investment asset. It is a way to preserve wealth, diversify risk and hedge against economic uncertainty.
Gold jewellery and investment gold both contain the same precious metal, but they are not valued in the same way. Investment gold is priced mainly by weight, purity and the market gold price, while jewellery may also include design, craftsmanship, brand value and emotional value.
Why Invest In Gold?
Investors invest in gold when their goal is to protect their assets and wealth from inflation, economic uncertainty and fluctuating markets. Investing in gold typically means purchasing gold bars and gold coins.
Investment gold is very pure. Investment gold is usually very high purity, often 999.9 fine gold, which makes it as pure as gold can get. Because the weight and gold content of investment gold products are precisely defined, their change in value is easy to track based on the market price of gold.
Some popular investment gold products are:
- Gold bars
- Canadian Maple Leaf coins
- South African Krugerrand coins
- Austrian Philharmoniker coins.
Investment gold can be bought and sold all over the world based on the international market price for gold. In the UK, qualifying investment gold is generally exempt from VAT, which is why many investors choose to invest in it. This exemption applies to qualifying physical gold bars and investment-grade coins, such as the ones listed above, and does not apply to other gold items, such as decorations or jewellery.
It is also important to note that while investment gold is free from value-added tax (VAT), some forms of investment gold may be subject to Capital Gains Tax (CGT) when sold at a profit. UK legal-tender gold coins, such as Britannias and Sovereigns from The Royal Mint, are generally exempt from CGT for UK individuals. Such coins are, for example, Britannias and Sovereigns minted by The Royal Mint.
Why Are Gold Jewellery and Investment Gold Not the Same?
Gold meant for consumer use comes in many forms. It is most commonly found in jewellery, but sometimes also in watches, keepsakes and decorative elements and in different luxury goods. The purpose of these items, although gold, is not to function as an investment, but to give the user aesthetic, useful and emotional value.
Gold jewellery and other items usually contain other metals because pure gold is very soft and cannot be used in its pure form in the production of jewellery and other items. Therefore, gold alloys are commonly used in jewellery to improve durability and enable different shades of gold, such as white gold and rose gold.
Unlike gold bars and gold coins, jewellery and decorative elements have different purities depending on what they will be used for. Jewellery has a purity mark that indicates how much of the item contains pure gold.
The most common gold purities in the UK are:
- 9 K (marked 375, contains 37.5% gold)
- 18 K (marked 750, contains 75% gold)
- 22 K (marked 916, contains 91.6% gold).
The higher the number, the more pure gold the item contains.
One of the more significant differences between investment gold and other gold items is the purity of the metal used. Investment gold is Investment gold is usually very high purity, while jewellery and other items contain less gold to ensure better durability. This is why a coin and a necklace weighing the same can be valued very differently.
Why Is Jewellery Priced Differently?
You might wonder why a piece of jewellery bought from a jeweller does not sell for the same price it was bought for. The reason lies in how the price is determined.
In addition to the gold, you also pay for the following in jewellery and other items:
- Design
- Production
- Brand
- Retailer’s margin
- Possible stones and intricate decorative details.
When you buy a piece of jewellery from a store, more than just the gold’s purity impact the price. When the item is sold to a gold buyer, the price is calculated based on the item’s weight, purity and current market price for gold. The original purchase price consists of details that are not considered in the resale value of the item.
Not All Value Is Financial
While the value of investment gold usually is strictly monetary, the value of gold – like rings, chains or brooches – may also be determined by emotional value and memories. An inherited necklace, an old watch or your great grandmother’s ring may feel much more valuable than the market price for the precious metal may indicate.
For that reason, it is important to understand how the value of gold is determined during a valuation. Even if the item may hold immeasurable emotional value to the owner, the price for it is based on the value of the material.
How Is the Price Determined at a Gold Valuation?
Whether you have investment gold, jewellery or other gold items, the valuation is usually based on purity, weight and the current gold price. For jewellery, it can be difficult to know the value just by looking at it, which is why a professional valuation can be helpful. At Gold Arthur, you can have your gold items valued free of charge and decide afterwards whether you want to sell.
