The Risks of Owning Gold
Gold marketing is unusually one-sided. Here is the other half: no income, real storage costs, theft, counterfeits, dealer spreads and the risk of buying at the wrong moment.
Most content about gold is produced by people who sell gold. This page is the other half of the argument, written by a shop that sells jewellery and has no bullion to move.
Key takeaways
- Gold produces no income, so time works against a flat position.
- Storage and insurance are real, recurring costs.
- Physical gold can be stolen in a way a brokerage account cannot.
- Counterfeits exist and the good ones are convincing.
- The gap between buying and selling prices is a guaranteed immediate loss.
- The price is volatile and has had long flat and falling periods.
Educational only
Vanhess is a jewellery shop in Coquitlam, British Columbia. We sell solid gold jewellery. We are not financial advisors, we do not sell bullion, and we do not forecast prices. This page explains how gold behaves so you can judge jewellery against bullion honestly. It is not investment advice. Talk to a licensed advisor about your own money.
The full list
| Risk | What it means in practice |
|---|---|
| No income | A flat gold price is a small real loss once costs are counted |
| Storage cost | A safe, or an annual vault fee, for as long as you hold |
| Insurance cost | Cover for the metal, which most home policies do not include by default |
| Theft | Physical gold is portable, anonymous and easy to resell |
| Counterfeits | Tungsten-cored fakes can pass weight and magnet tests |
| Dealer spread | You buy above the metal price and sell below it, immediately |
| Volatility | Large drawdowns happen, and have lasted years |
| Liquidity in a hurry | Selling fast usually means accepting a worse price |
| Concentration | One asset, one price, no diversification within the holding |
The spread is the one people underestimate
Every physical gold purchase involves buying above the metal price and selling below it. That round-trip cost is incurred immediately and with certainty, unlike the price movement, which is uncertain. The gold price has to move in your favour by more than the spread before you are even level.
With jewellery this effect is enormous, because the premium over metal value is so much larger. That is the single clearest reason jewellery is a poor investment vehicle, and it applies no matter how well the piece is made.
Be careful
Storage at home and insurance interact badly. Many insurers require specific conditions for valuables cover, and a large quantity of gold in a house may not be covered at all under a standard policy. Check before you buy, not after.
Frequently Asked Questions
What are the disadvantages of investing in gold?
It produces no income, so holding it costs you the return you could have earned elsewhere, plus storage and insurance. Physical gold can be stolen. Counterfeits exist. The gap between the buying and selling price is an immediate certain loss. And the price is volatile, with historical periods of years-long decline.
Is gold a safe investment?
It is often described as safe because it carries no counterparty risk and cannot go bankrupt. That is different from the price being stable, which it is not. Gold has had large falls and long flat periods, so safe in the sense of no default is not the same as safe in the sense of no loss.
Can gold jewellery be insured?
Usually yes, but often not adequately under a standard home policy, which typically has a low sub-limit for jewellery as a category. Individual valuable pieces normally need to be scheduled on the policy by name and value, which requires a current written appraisal.