Investing in Precious Metals vs. Diamonds or Gemstones in Scottsdale
The value of stocks and bonds may fluctuate wildly, and real estate can suddenly lose its value if the bubble bursts. But the value of precious metals like gold and silver, as well as diamonds and gemstones, remains fairly constant over time, making them excellent investments. While the value of precious metals and stones does fluctuate, the movements are not as erratic and they maintain a healthy value.
If your investment budget is limited, you might not be able to buy both in large quantities, but you may be able to start with one and diversify as your portfolio grows. Here are a few things you need to know about the difference between investing in precious metals or gemstones to help you decide where to start:
Historical Pricing Trends
Gold has had some big price fluctuations over the decades, but it has been on a steady upward climb over the long term.
Points of note include gold reaching a 100-year high of $2,073.23 in January 1980, but reaching a 20-year low of $360.80 in January 2001 before starting to climb again. Those prices are adjusted for inflation.
The reason gold soared in 1980 is that oil prices were on the rise, inflation was high, and there was military action in Afghanistan and Iran. As a result, investors purchased gold heavily, sending the price up.
Gold plummeted again at the turn of the millennium thanks to the economic recession and the uncertainty after the Sept. 11 attacks on the World Trade Center.
Meanwhile, diamonds and other gemstones have had a steady climb with fewer fluctuations. In fact, the value of diamonds has increased about 14 percent each year since 1960, making them a stable investment. The price of diamonds has dropped during turbulent times, such as the housing crisis and recession of recent years.
Tracking Gold and Diamonds
Because precious metals and gemstones are so valuable, many atrocities have been committed in the name of mining them and selling them. Wars have broken out in areas that are rich in these resources, such as parts of Africa. Movies have even been made about the terrible human rights abuses that have been committed in pursuit of these resources.
Buying gold and diamonds that come from these regions directly supports those atrocities. That’s why it’s important to know the source of your gold and diamonds before you buy them.
A jeweler should be able to track your gold or diamonds from the mine to your hands. If you buy the gold or diamonds secondhand from an individual or a pawn shop, ask for the paper work that was originally included with the purchase. The paperwork may not always be available, but when it is, it provides the reassurance that you are buying an ethically sourced diamond.
Getting paperwork is especially important because diamonds are easy to carry across state lines. They are small and easy to hide, so it’s easy to smuggle them out of a conflict area.
You can ask for the same paperwork for gold. In addition, the London Bullion Market Association provides the Responsible Gold Guidance standards. Any mine who meets the standards is said to engage in ethical practices for sourcing their gold. Look for this or a similar certification to know that your gold is not supporting the practice of terrorism or other human rights abuses.
Inheritance and Tax on Gold and Diamonds
Inheriting gold and diamonds can be a good way to build wealth. The good news is that gold and diamonds maintain their value, and you don’t have to pay taxes when you inherit them.
The exception is if you sell the gold or diamonds, which requires that you pay sales tax. However, you will only be required to pay tax on the amount that the value increased from when you inherited it. Therefore, if you inherit a diamond that is worth $1,000 and you sell it for $1,500, you will have to pay sales tax on the $500.
It is important that you keep any paperwork that came with the inheritance so that you can prove its value. If you don’t get any paperwork, you should have the item appraised immediately. Otherwise, you could be on the hook for more tax when — or if — you ultimately sell the item.
Because of the favorable way that the tax code treats inheriting diamonds and gold, many people have used these valuables to get around estate taxes. So instead of leaving their family huge sums of cash, they would take that cash and buy gold or diamonds to leave them instead. Unlike cash, the gold and diamonds would actually increase in value, which would leave them with a bigger inheritance ultimately.
Ultimately, both precious metals and diamonds and other gemstones are great investments. The value may fluctuate over time, but you can always count on these items having great worth. In fact, many people have put their faith in gold and diamonds when the economy was faltering.
Whether you invest in gold or diamonds, or you create a portfolio of both, it is important that you find the highest quality goods. You can assure their quality by getting certifications, paperwork or other records, as well as having an appraiser evaluate the items. Make sure you have them re-appraised periodically, and keep them in a secure place such as a home safe or a safety deposit box.
If you haven’t yet started your portfolio of gold or diamonds, shopping at your local pawn shop is a great place to start. Private Pawn has a wide selection of quality gold and diamonds. We sell raw gold and diamonds or gold and diamond jewelry. We sell both for some of the most competitive prices in the area.
Private Pawn Scottsdale – 85257
7841 E. McDowell Rd., Suite 911
Scottsdale AZ 85257
Private Pawn Mesa – 85207
8151 E. Apache Trail, Suite 911
Mesa AZ 85207
Private Pawn Mesa – 85210
1145 S. Mesa Dr., Suite 911
Mesa AZ 85210
Private Pawn Mesa – 85204
361 S. Lindsay Rd., Suite 911
Mesa AZ 85204