Gold has always been more than just a precious metal in Indian households. It is part of weddings, family traditions, celebrations and, for many families, their approach to saving. Ask someone why they bought a few sovereigns of gold jewellery, and you will often hear something like:
“It’s an asset. If we ever need money, we can sell it.”
There is some logic behind this. Gold can store value and play a role in a diversified portfolio. Jewellery can also be worn, gifted and, when required, converted into cash. But one important question often gets missed: If I buy gold as jewellery, how much of the money I spend actually goes toward gold? That is where the investment argument becomes less straightforward.
About the author: Vishnu M is a SEBI-registered investment adviser and a member of Fee-only India, a group of fixed-fee-only SEBI-registered advisors. He can be contacted via his website vishnum.in
The Price You See Is Not the Price You Pay
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Consider a simple example. Suppose the market price of gold is ₹15,000 per gram. You decide to buy an 8-gram piece of jewellery. The underlying gold value is therefore: 8 × ₹15,000 = ₹1,20,000, but the final bill isn’t ₹1,20,000.
Depending on the product and jeweller, you may also pay making charges, wastage or other applicable charges, along with GST. For illustration, assume the additional making and related charges come to 15%. The calculation could look like this:
| Component | Amount |
|---|---|
| Gold value | ₹1,20,000 |
| Making/wastage charges | ₹18,000 |
| GST | ~₹4,140 |
| Total paid | ~₹1,42,140 |
You have therefore paid around ₹1.42 lakh for jewellery containing ₹1.20 lakh worth of gold. That ₹22,000 difference is important. It isn’t money that will automatically participate in the future increase in gold prices. This is the first reason jewellery and gold as an investment should not be treated as the same thing.
Now Fast-Forward Four Years
This is where the difference becomes much clearer. Suppose gold rises from ₹15,000 to ₹17,000 per gram. Your 8 grams of gold would now have a market value of: 8 × ₹17,000 = ₹1,36,000
Gold has gone up by ₹16,000. But you originally paid approximately ₹1.42 lakh for the jewellery. So, you cannot simply look at the gold price and conclude that your investment has generated a return.
When you sell the jewellery, the original making charges and GST aren’t simply added back to the resale value. Depending on the jewellery and the terms of the transaction, there may also be deductions for stones, non-gold components, purity, melting or other applicable charges.
The exact amount you receive will therefore depend on the product and the jeweller. And this creates an important distinction: The price of gold can go up without your jewellery investment generating the return you expected.
This Is Where the “It’s Still an Asset” Argument Can Mislead Us
The jewellery does still contain gold. It has value. It can potentially be sold or pledged. But having value and generating a good investment return are two different things.
Imagine buying a car and saying: “It’s an investment because I can sell it later.” Technically, the car has resale value. But that doesn’t make it an investment in the same sense as an asset purchased primarily to generate or preserve wealth.
Jewellery has a similar distinction. It can have financial value without being an efficient investment vehicle. And there is another cost that doesn’t appear on the jewellery bill: Time.
If the initial purchase costs are high, gold needs to appreciate enough just to overcome those costs before you begin generating a meaningful return on the money you actually spent.
So, Should You Stop Buying Gold Jewellery?
Not at all. This isn’t an argument against jewellery. If you want to buy a necklace for your daughter’s wedding, a bangle for your wife, or a piece you genuinely enjoy wearing, there is a perfectly valid reason to buy it. You don’t have to justify every personal purchase as an investment.
That’s actually where I think the conversation around gold jewellery needs to change. Buy jewellery because you want jewellery. If your objective is to invest in gold, then evaluate gold as an investment separately.
Depending on your objective, you could consider investment-oriented options such as Gold ETFs or Gold mutual funds, or physical gold in forms where the costs are more transparent and appropriate to your purpose. Each option has its own costs, risks, liquidity and taxation, so the right choice depends on the investor and the objective.
The Question to Ask Before Buying
The next time someone says: “Gold jewellery is a good investment because gold prices always go up.” I would ask one more question: “Are we talking about the return on gold, or the return on the money actually spent on the jewellery?”
They are not necessarily the same. Gold may appreciate. But your return depends on what you paid, what portion of that amount actually represents gold, what you receive when you sell, and how long your money was invested.
That is why gold jewellery should not automatically be treated as an investment simply because it contains gold. Gold can be an investment. Jewellery can be an asset. But they are not the same financial decision. And once you separate those two ideas, the economics of buying gold jewellery become much easier to understand.
Disclaimer:
This is for educational and informational purposes only and does not constitute investment advice or a recommendation to buy or sell any securities. This view does not consider individual financial circumstances or risk profiles. Read all the related documents carefully before investing.