Are you someone who loves collecting jewellery? Or maybe it’s your engagement, and you bought the engagement ring? Or your spouse’s birthday, and you have thought of gifting him or her a ring? Well, all these scenarios might sound different, but there is one similar thing between them: the purchase of a jewellery item is the focal point.
Buying and gifting jewellery is one thing, but everyone knows that it is not merely an emotional gift but also a monetary gift. It is a physical thing that stays with you, but its value is not constant. Maybe you bought some jewellery, and then someone asks you, “Have you valued it?”
At that point, many people assumed the purchase price and the jewellery valuation were the same. After all, you just paid for it — so that must be its value, right? But here’s the catch. The value of your jewellery often changes within days, and due to the heavy fluctuations in gold and silver prices, it is likely that this value will change significantly.
Let’s clear up the confusion and explain the real difference between the purchase price and jewellery valuation and why understanding this distinction is essential— especially for insurance.
What’s the Purchase Price?
When it comes to understanding the critical terms, the most straightforward and easiest is the purchase price. It is the price you paid when you bought jewellery. This price includes several components, some of which are listed below.
This price may include:
- Retail markups
- Design and craftsmanship costs
- Brand or location premiums
- Promotional pricing or discounts
Therefore, this price reflects the asset’s value only at the time of purchase and becomes irrelevant once the item is acquired, as the jewellery is then subject to price fluctuations.
What Is a Jewellery Valuation?
Once you have the jewellery, chances are high that you have no idea about its current value. To know the current worth, you must get the valuation done. Jewellery valuations are a professional assessment of what the value of your jewellery might be in the open market. This sort of helps you understand what you can get in exchange for the piece that you have.
The appraisal isn’t about what you paid. It’s about:
- Current metal and gemstone prices
- Availability of materials
- Craftsmanship required to recreate the piece
- Market fluctuations
Why Purchase Price and Jewellery Valuation Are Rarely the Same
This is a common question that people have confusion on, and to explain things in a simple and straightforward manner, the purchase price is something that was the value of the piece on the day you bought it, while the jewellery appreciation is something that will tell you the price of the piece today, which might have increased or decreased depending on several global situations which might have in a way impacted the value of the precious metals and gemstones. There are several reasons why the price of the same piece differs through the years, and a few such reasons have been listed below.
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Market Prices Change
Gold, platinum, and gemstones don’t stay at the same price. If the price of the metal your jewellery is made from is rising, your piece’s price may have risen too. If the price is decreasing for any reason, your jewellery may now be worth less than what you paid for it. These fluctuations in the prices most often come due to the impending global tensions when the focus of the world shifts towards investing in safe havens, which often happen to be gold and silver.
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Bespoke Jewellery Has No Standard Price
When it comes to pre-made jewellery, there is a shelf price, but bespoke jewellery in London or custom-made pieces do not have a standard price for reference. The price of these pieces depends on various factors, and when getting the valuation done, the following points are listed below that are considered to get the right valuation documented.
- Important factors in determining the valuation include the time and skill required to recreate the design.
- Custom gemstone sourcing
- Specialist craftsmanship
This often results in a valuation that’s significantly different from what was originally paid.
Summing Up
To sum up, when you own jewellery, there are a few basic things that you must understand and always keep in mind when planning to buy jewellery. Having a fair idea about the purchase price and the valuation price can significantly help you in calculating the profits made throughout the years and how your assets are appreciating.
