The Value and Risk in Your Jewelry Box

BOSTON (MainStreet) -- Spiking gold prices over the past few years have been a boon for many Americans, and not just those who invest in bullion, coins and mining companies.

The average person has seen their jewelry collection evolve from fashion to asset. The growing presence of shops and websites offering to buy unwanted gold jewelry is a testimony to how in demand and profitable the precious metal has become. Though less headline-grabbing, silver and platinum have also become even more valuable commodities; from January 2000 to January 2010, the price of gold quadrupled and the prices of silver and platinum more than tripled.

That entails an overlooked risk for many folks. When even a tiny earring clasp is worth enough to pay for dinner at a high-end restaurant, even a modest jewelry box can be worth thousands, ounce by ounce. And yet many fail to recognize the full value of what they own.

While most investors in precious metals may track prices closely on a daily basis, they are unlikely to consider how much their jewelry, silverware and other collectibles have appreciated in value, says Robert Courtemanche, division president of ACE Private Risk Services, the high net worth personal insurance business of the ACE Group.

The rapid rises in the prices of gold, silver and platinum have therefore created an insurance gap, he says. A heavy gold necklace or heirloom silverware collection acquired years ago may be insured for only a fraction of the cost to replace it at today's prices.

"Since the economic downturn there is a general realization that these assets they have are worth more and they should be properly protecting them, especially if their financial portfolio, their liquid assets, have been fluctuating," Courtemanche says.

In a white paper published by ACE, Roger Ponn, a Chicago-based appraiser with more than 40 years in the business, spoke to the example of a long-time client's jewelry collection he recently reappraised. In 2004, the collection was valued at $384,000. Six years later, its value had risen to $682,000.

Ponn cites another example, that of a high-net-worth family in Wyoming who saw their jewelry collection of more than 400 pieces increase in value by 45% over two years. The high quality of the jewelry made the value rise more than it would have for most collections.

"Quite a few of their handmade pieces were 22- and 24-karat gold, with 24-karat, of course, being pure gold," he says. "Higher karat content means faster price appreciation, when precious metal prices rise. This is similar to what occurs with gold bullion and gold coins, which appreciate more rapidly than most gold jewelry, simply because they are made of pure gold."