With silver prices going up, up, up, you’d think that silver would be a stellar jewelry investment, right?

After all, buying jewelry as an investment is a good thing. Isn’t it? According to financial wiz, Suzi Orman, buying jewelry as a long term investment is actually not such a good idea. Her biggest point is that the markup seen in stores overrides the benefits of buying jewelry as an investment. She has a good point.

Silver jewelry demonstrates this perfectly.

There are several factors that go into the pricing of jewelry. And it’s typical for sellers to mark up their pieces 100, 200 or 300 percent of the cost to manufacture it, which really shouldn’t be surprising. But these other points just might surprise you.

Gram Price

The most important aspect of silver jewelry pricing is the price per gram. This is the basic material cost of the piece. For example, the price of silver today is $35.00 (give or take some change) per ounce. To determine the gram price, you must divide the per ounce price by 31.5. The result is $1.11. So, the raw material cost for a 10 ounce necklace is $10.11. So why would someone pay $40.00 or more for a necklace that only cost $10 to manufacture? Well, I can’t answer that, but there are some reasons for the price difference between manufacture and retail cost.

Additional Materials

Any time you add something extra to a piece of jewelry, the cost will increase exponentially. So, if there’s a gemstone or two, other precious metals, pearls or a rhodium finish all add to the cost of the manufacturing.

Labor Costs

Someone has to make the jewelry, and that cost must be accounted for in the final price. The additional labor costs associated with a piece are driven by the amount of craftsmanship involved, the types of settings needed for any gemstones and the time necessary to melt, cast, polish and finish a piece.

Shipping and Customs Costs

Since it’s not unusual for silver jewelry to be made outside the U.S., shipping and customs costs must be figured into the final pricing.

Overhead of the Jeweler

It does cost money to run a jewelry store, and if owners aren’t including their overhead costs, they won’t be in business very long. How much these impact the final jewelry price is determined by a number of factors including number of employees, size of store, cost of inventory, etc.

Oh yeah, Profit

You have to include this! Otherwise, a jewelry store is simply in business to be a pass-through. How much profit to include is decided by the business. Of course, they can’t go too crazy or they won’t sell anything.

Now that you know what goes into the pricing of a silver piece of jewelry, this next statement might not surprise you. Silver jewelry is pretty, but it’s not a great investment. We see disappointed faces all the time when a hopeful seller brings in a pieces of silver jewelry expecting a windfall and leaving with pocket change.

Believe me, this hurts us to see. We want our sellers to be excited and happy with their decision to lighten their gold and silver loads. It’s sad to see someone who realizes they paid a lot of money for something that really wasn’t truly worth a lot. Often, we’ll suggest they keep the piece if it has any sentimental value. At least that has some worth, if only to that person.

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