When considering the question as to whether pearls are investment worthy, it is logical to first consider what makes an asset, any asset, investment worthy?
Consequently, pearls should be compared with other asset classes, financial assets such as bonds, equities, and even term deposits; real estate; hard assets such as precious metals (gold, silver, platinum, palladium); as well as other collectible assets such as diamonds, rubies, sapphires, and other precious gemstones.
There is an enormous difference between bonds and term deposits on the one hand and equities on the other. US term deposits are currently offering negligible nominal returns and negative real (after adjusting for inflation) returns – you are actually losing money when depositing it in a bank. Similarly, bonds, although deemed to be very safe, offer negative real returns.
Due to the unnaturally low interest rates brought about by the Federal Reserve’s Quantitative Easing, (QE) the stock market has boomed over the past few years; however, it is wise not to forget the events of 2007/2008 and the Great Financial Crisis (GFC). Buying the stock market at the wrong time can be harmful to your wealth, and with the Dow Jones sitting at record highs and the S&P 500 not having had a 10% correction in over 2.5 years…
We are all familiar with what happened to the US housing market up to and including the GFC. The housing market in the US and many other countries boomed before the bust and although interest rates remain at record low levels, housing prices have not returned to their pre-crash levels. Similarly, real estate can often not be sold in a hurry should you require money.
Gold had an almost decade-long stellar run until late-2011from approximately $280/oz to $1925/oz. Since then, gold corrected to the $1180 and currently trades just under $1300. (Note that gold is being used as a proxy for the other precious metals as they have performed, within reason, in a similar manner). If it is volatility you like, gold is seemingly right up there.
The Federal Reserve’s QE has resulted in trillions of US dollars being printed out of thin air. This has debased the US currency, and coupled with the emergence of China as an economic superpower, has many pundits believing that the days of the US dollar holding its currency reserve status are limited. This has resulted in strong price appreciation for precious stones, including pearls as people seek to swap paper money for real assets that cannot be duplicated and reproduced with the click of a computer mouse. Try recreating a stunning natural or cultured pearl.
When markets struggled and collapsed during the GFC, prices of the best quality jewels barely paused for breath before continuing their ascent.
Other Investment Considerations
US residents must report foreign bank accounts as well as their gold holdings. Pearls are a form of wealth that cannot be easily reproduced, are easy to transport across borders as there are no reporting requirements pertaining to them, they can be quickly and easily converted to cash as there is a buoyant trade and auction market for pearls, and they are a proven store of wealth and have been for centuries. (To use an extreme example, the famous La Peregina pearl which Richard Burton bought for Elizabeth Taylor in 1969 for $37,000, sold for over $11 million in 2011.)
It is apparent that pearls meet every criteria for a sound investment. And the icing on the cake? You can enjoy your pearls on a daily basis. Have you ever tried wearing a stock certificate?
Disclaimer: The information contained in this article is not intended as investment advice and should not be misconstrued as such.