Bitcoin VS Gold from a Jewellers perspective

I'm a manufacturing jeweller based in South Africa. So you might be thinking that I would rather be investing in metals and diamonds seeing as this is my industry but that would be wrong. Ive been in the jewellery business for 14 years now and love my work, often I get get customers wanting to buy metal or diamonds as an investment. In my next post post I will talk about diamonds as an investment but for now let me just focus on gold.

When I got into this industry 14 years ago gold was around $200 per ounce and now its sitting at around $1200. Many people will tell you that this is a great investment and they have their valid points but with inflation over those 14 years is it really?
If you plan to invest in gold your best bet is to buy fine gold IE 24ct or Kruger Rand's. First lets find out what Krugerrands are. The Krugerrand is a South African coin, first minted in 1967 to help market South African gold. It is minted from a gold alloy that is 91.67% pure (22 Carats). One full Krugerrand contains 1 ounce of fine gold (24ct) Krugerrands are available in 4 denominations: 1/10oz, 1/4oz, 1/2oz and a 1oz. Krugerrands are not subject to VAT, since they are considered legal tender coins. It is subject to capital gains tax upon selling, provided the profit is above a certain threshold. Currently the threshold is R10 000, but this is subject to change. The fact that bitcoin is divisible to eight decimal points makes it a lot easier to buy the amount you can afford and if we can get the economy to move to a place where we only transact in cryptos there will be no capital gains tax implications.

Now lets talk about the people who think their money is safe in jewellery. There are jewellery stores everywhere selling gold items and people think that it is an investment and that their money is safe. What I want people to realize is when you go buy a gold ring sure you are buying gold but you are also buying the labor that went into getting that gold out of the ground and manufacturing it into something you can wear, not to mention that now you have to pay VAT on the item you bought. In South Africa the VAT is 14%. Lets say you go buy a gold ring in a store for $1000 that price includes the VAT and the manufacturing cost involved. Jewellery stores also need to make a profit and pay their staff and shopping mall rentals. Now 2 years later you want to sell your $1000 item so you take it back to a jeweller thinking that your item is valuable and you can maybe even make some profit. Jewellers and 2nd hand traders will never buy your item for anything near what you paid for it, here's why.
Your $1000 item is now considered to be "old gold" The buyer has no interest in paying for the manufacturing and VAT on your "precious" $1000 item. On average you will get an offer of $200 for your $1000 item. That's a -80% on your gold investment, not because jewellers are ripping you off, its because it has absolutely no value other than the fine gold in your item. If it is a 9ct ring it is made up of 37.5% fine gold and the balance is an alloy. 18ct= 75% fine gold .In order to extract the fine gold it would need to be refined and obviously there is a cost involved in that process. So once a jeweller has subtracted the VAT paid, manufacturing costs and refining fee you get an offer to purchase your item at 20% of what you paid for it.
For all those silver lovers out there the same applies.
Jewellery is not an investment.

Now ask yourself if bitcoin has any of these problems.

If you like this post please up vote and subscribe. On my next post I will explain why Diamonds are not a great investment either.