The question: “how much is my jewelry worth?” is not as simple as it may seem. To answer it, we have to first decide which type of worth or value we are talking about because jewelry has different values in different contexts. The main types of value are: intrinsic value, resale value, and appraised value.
Intrinsic Value or Cash Value
The intrinsic value of jewelry is the simplest and easiest to understand. The equation for intrinsic value is:
intrinsic value = metal value + gem value
The metal (gold, silver, platinum, etc.) and gems (diamonds, sapphires, emeralds, etc.) are valued as raw materials based on current market rates. So, gold jewelry value, in this context, is largely determined by the current spot price of gold. Intrinsic value can be viewed as the recycle value of jewelry. Imagine the jewelry as a pile of metal and gemstones, not as a whole piece of jewelry. Some other names for intrinsic value are: cash value, cash wholesale value, and scrap value.
Let’s look at an example. Assume a ring is made out of 5 grams of 14k gold and it has a 0.25 carat diamond. It has a gold value, of approximately $121 when gold is $1,300 per ounce, and a diamond value of roughly $250. That makes its intrinsic value $371.
Here is how to calculate the gold price.
- Find the daily gold spot price in dollars per troy ounce (a website like kitco.com is good for that). In this example we’ll use $1,300. Curious about what a troy ounce is? Check out our article on gold weights.
- Convert that price into dollars per gram by dividing it by 31.1 which equals $41.80 per gram.
- Multiply that by the gold purity of the jewelry. 14 karat gold is roughly 58% gold and 42% alloy. So, that would be: $41.80 × 0.58 = $24.24 which is the price per gram of 14 karat gold.
- Multiply the per gram price by the number of grams in the jewelry item. So, you have: $24.24 × 5 grams = $121.
Here’s the complete math for our example ring: $121 = $1,300 / 31.1 × 0.58 × 5. This would be the full spot price for the gold.
The diamond price is more complicated. It is basically the common wholesale price modified by the cut grade of the gem. The wholesale price is a dynamic price that changes daily and is influenced by the source selected. One of the most popular diamond price guides is Rapport. The prices are arranged by shape, size, color, and clarity (the 4 C’s of diamonds). Once the initial price is determined, the last step is to adjust the price by the cut grade of the individual diamond.
Resale Value or Retail/Wholesale Price
Some used jewelry has a resale value that is higher than its intrinsic value. This price includes the intrinsic value plus the workmanship to create the jewelry. Furthermore, if the jewelry is desirable in the market place, then a design premium is added. The equation for resale value is:
resale value = intrinsic value + workmanship + style
Of course, this isn’t an exact science, and other factors can influence the resale value as well. For example, two identical diamond solitaire engagement rings can have vastly different resale values, if one is stamped “Tiffany” and the other is not.
Appraised Value or Replacement Cost
Appraised value is the most confusing value partly because, on the surface, it seems to be the simplest. Most people are aware of jewelry appraised value. But, the key to understanding appraised value is that this value is only theoretical. It is not stating what the jewelry is worth, but what it would cost to replace the item in new condition.
people come to a false understanding that their jewelry is worth what the appraisal value states
Jewelry appraisals are the documents that deal with jewelry worth. There are actually a few different kinds of appraisals, but when most people talk about jewelry appraisals they mean insurance appraisals (check out our article about jewelry appraisal types). This is the heart of the problem of what jewelry is worth. Jewelry insurance appraisals don’t have anything to do with the worth of the jewelry item, only its replacement cost.
The purpose of a jewelry insurance appraisal is to detail what it would cost to replace a jewelry item if it is lost, stolen, or damaged. It is not meant to show what the item’s market value is at the time.
Here’s an example. If I were doing a jewelry type of appraisal on a 2000 Toyota Camry, I would value it at around $25,000. Why? Because that is how much it would cost to replace the 2000 Toyota Camry with a new 2014 Toyota Camry. Now, no one is saying that the 2000 Toyota Camry is worth $25,000, but it would appraise for that amount.
When this is done in the jewelry world, people come to a false understanding that their jewelry is worth what the appraisal value states. Just like the 2000 Toyota Camry, the jewelry may be used and out of date. In many cases, the jewelry is only worth the intrinsic value. This could be as little as 5% to 20% of the appraised value.
New Value vs. Used Value
Another big point of confusion with jewelry values is that the value of a used piece of jewelry can be dramatically different from what it cost new. The cost of a new jewelry item includes the intrinsic value and (like resale value above) the cost of workmanship which could be 2 to 5 times the value of the gold and gems alone. Even before the work begins, there is the value added by the jewelry designer. This can double the cost of the finished jewelry, or it can have a negligible impact.
There are still more costs to consider with new jewelry. There is the cost of bringing it to market which can include: wholesale costs, import costs, marketing costs, transportation costs, and more. Finally ask: is the jewelry store a high end retailer that can get a two or three times mark up over wholesale cost? Are the sales people receiving a high or low commission? What are the overhead costs where the jewelry is being sold? What is the regulatory and taxation environment like?
Here is an example breakdown of how some of these costs can look. This is a bit exaggerated, but it is just meant to show how much the final price can vary.
|Design cost||$10 to $100||$110 to $200|
|Workmanship cost||$100 to $500||$210 to $700|
|Wholesale cost||10% to 33%||$231 to $931|
|Import cost||0% to 40%||$231 to $1,303|
|Marketing cost||20% to 100%||$277 to $2,606|
|Jewelry store mark up||35% to 300%||$332 to $7,818|
|Commission||5% to 40%||$349 to $10,945|
|Taxes||0% to 10%||$349 to $12,040|
With all of the possible variations, it is easy to see that the price paid has little correlation to the intrinsic value of an item of jewelry. The price of a new jewelry item is based primarily on the jewelry stores’ business model. If it is a high end jewelry store with a lot of overhead and added value, then the jewelry price could be 5 to 10 times more than the intrinsic value. If it is a discount jewelry store, then the price over intrinsic value could be from 1 to 3 times.
So, how much is your jewelry worth? It is definitely worth its intrinsic value. Every other price just depends on the situation. If you’re curious about how much your jewelry is worth, we recommend that you deal with a professional gemologist who can explain each of the values to you. Feel free to come in, and our gemologists will be happy to give you a free value appraisal of your jewelry.