Why Gold Jewellery May Not Be a Smart Investment: Experts Explain the Real Cost Behind Your Purchase

Gold has long held a special place in Indian households. For generations, families have considered gold jewellery one of the safest and most dependable forms of investment. However, a detailed report by Sanjeev Prasad, Managing Director at Kotak Institutional Equities, challenges this long-held belief. According to the report, relying on jewellery as an investment tool may not only be inefficient but can also result in financial loss over time.

The Hidden Costs: Jewellery Must Appreciate 25–30% Just to Break Even

Gold jewellery is significantly more expensive than the actual value of gold used in it. This is because jewellers add multiple charges to every piece, including:

• Making charges

• Design charges

• Costs of embedded stones

• Brand premium

As highlighted in the report, these additional expenses inflate the overall price of the jewellery by a wide margin. Therefore, if someone purchases jewellery purely for investment, the gold price must rise by at least 25–30% before the buyer can recover the original cost.

For example:
If you purchase a piece of jewellery priced at ₹1,00,000 today, you will only make a profit if gold prices rise well above ₹1,25,000. Until that threshold is crossed, the investment remains at a loss.

Gold Prices Have Risen Sharply — But Jewellery Returns Lag Behind

India has witnessed record-high gold prices in recent years. As a result, households with gold hoards have seen their asset values rise. However, the Kotak report points out a crucial gap: the returns earned from gold jewellery lag significantly behind the rise in gold prices.

Based on historical calculations:

• Over the last 15 years, gold jewellery delivered an average annual return of 10.3%.

• During the same period, the market price of pure gold rose by approximately 12.5% annually.

This means jewellery underperformed pure gold by more than 2% every year—primarily due to the heavy costs attached to crafting and design. Despite rising prices, the net returns on jewellery remain comparatively low.

Who Owns Most of India’s Gold — And Why?

The report also sheds light on gold ownership patterns in the country:

• Most of India’s gold is held by low- and middle-income households.

• Families often view gold jewellery as a security reserve for emergencies.

• It is also widely used to meet large expenses like children’s education and weddings.

However, the emotional and cultural value attached to gold often overshadows its financial inefficiencies as an investment.

Better Investment Alternatives: ETFs, Coins and Gold Bars

Financial experts strongly advise that if someone wants to invest in gold, opting for jewellery is not the right approach. Instead, they recommend choosing these investment-friendly options:

1. Gold ETFs

• No making charges

• Transparent pricing

• Highly liquid

• Ideal for long-term investors

2. Gold Coins

• Lower premiums compared to jewellery

• Easy to store and sell

3. Gold Bars

• Best value for bulk purchases

• No design or labour costs

• Higher purity and better resale value

These options ensure that your investment mirrors actual gold prices more accurately, offering better returns with fewer deductions.

A Warning Sign for India’s Economy

The report also highlights a broader concern. If Indians continue buying jewellery as their primary form of investment, it could worsen the country’s economic indicators, especially:

• Current Account Deficit (CAD)

• Trade Deficit

India imports most of its gold, and large-scale demand puts pressure on forex reserves. Continued heavy investment in gold jewellery may therefore have long-term macroeconomic consequences.

Conclusion

While gold remains a trusted asset in Indian culture, jewellery is not an ideal investment vehicle. The high cost of craftsmanship, lower resale value, and slower returns compared to pure gold make it financially unviable as an investment option. For those looking to build wealth through gold, options like ETFs, coins and bars offer far better efficiency, transparency, and long-term value.