Austerity may be the watchword of the moment, but demand for luxury goods continues unabated, nowhere more so than in the jewellery sector. For some, splashing the cash on upmarket trinkets creates a welcome feeling that things aren't so bad. For others, it may be tempting to think jewellery is an alternative safe haven to gold – and one that is considerably more enjoyable to own.
However, anyone considering jewellery as an investment needs to choose carefully and digest quite a few health warnings. It's not just what you buy but where you buy it that will determine whether the stones and precious metals you acquire will hold their value and possibly earn a profit or simply turn out to be an expensive indulgence.
The notion that jewellery retains its value is ingrained in traditions and cultures around the world: tribal people sometimes use beads as currency, while jewellery may be offered as a wedding dowry. The implication is that jewellery endures and retains its value over the long term.
Jewellery is also extremely portable, and gold rings, necklaces and diamonds have often been smuggled by refugees forced to flee a country and wanting to take their wealth with them.
Nevertheless, the first thing to learn about jewellery is that if you buy new from a high street retailer, you will be losing out from the word go. "New jewellery is subject to 17.5% VAT, going up soon to 20%," says Blackpool-based bullion and jewellery dealer Lawrence Chard. "The retailer usually imposes a 100% mark-up. Then there's the wholesaler's margin and the manufacturer's. If you spent £100 on a piece of jewellery one day and tried to sell it the next, you might only get £30 for it." The spread on buying and selling gold coins, by contrast, can be as little as 5%, he adds.
Jean Ghika, UK head of jewellery at auction house Bonhams, puts it slightly differently: "Some people have a perception when they buy a piece of new jewellery that it will go up substantially in value over time, and they are disappointed when they find out that it hasn't. In practice, it can take 30 years or so to get back the initial value when you come to sell it."
Pieces with designer labels attached, sometimes marketed as part of a 'limited edition', are even more susceptible to this erosion of value; you're paying for the marketing as well as the other costs. While brand-new jewellery fulfils a certain role in the market, wealth preservation certainly isn't part of it.
This general rule doesn't always apply to individual pieces designed by up-and-coming artists, more of which later. For the most part, though, to have any chance of acquiring jewellery that proves to be a good investment, you need to buy second-hand, which normally means vintage or antique pieces.
If you buy well and from a source that has low costs, jewellery can prove profitable to own, but it should not be bought solely as an investment.
Ghika singles out Art Deco jewellery from 1920 to 1935, typically incorporating platinum and diamonds, as worth considering. "Pieces from that period have strong linear designs that still look modern today," she explains. "Anything signed by Cartier, Van Cleef or Arpels is particularly sought after because their pieces were of exceptional quality."
Other well-known makers include Boucheron from France and Tiffany from the US. Rings and earrings are the most popular items, because they are so easy to wear, while brooches are less so.
The value of jewellery can be influenced by underlying movements in gold and gemstone markets, says Ghika, but quality jewellery is usually worth considerably more than the sum of its component materials. However, if you have a significant stone – for example, a diamond more than five carats in size – the value of the stone rises dramatically and becomes the key determinant of value.
Good stones from older jewellery have often been removed and reset in a new piece to maximise their value, which is why it is hard to find very old diamond rings.
Another, more affordable, investment worth considering is artist-made jewellery from the 1960s. UK designers Andrew Grima, John Donald and Stuart Devlin are some names to look out for.
Natural pearls are undergoing a resurgence in popularity. Until the 1920s, when affordable cultured pearls came in, it could take decades to assemble a string of matching natural pearls, and the intrinsic worth of such pearls is now being recognised. "There has been a huge increase in their price, and you could have doubled your money over the last 10 years," Ghika says.
John Benjamin, an independent jewellery consultant and long-standing expert on Antiques Roadshow, says signed pieces from leading studios still have cachet today. Quality brands such as Cartier, Bulgari and Van Cleef are sought after, and Christian Dior is emerging as a significant player.
"People who buy jewellery often need security and these names do provide a guarantee of quality," says Benjamin. These pieces may turn out to be collectible in 70 or 80 years' time, although you will need more than patience to wait that long for a return.
His advice is to buy jewellery with individual character and style. "I recommend looking at Edwardian jewellery," says Benjamin. "The style of the Belle Epoque is quite fussy, with diamond tendrils and garlands, often set in platinum. It's the style of the Titanic era."
Georgian jewellery – though relatively scarce – is a personal favourite of Benjamin's. "You will frequently find gems – topaz, garnet, ruby, sapphire and diamond – set asymmetrically on a soft gold mount. Sometimes there is a back compartment to hold a locket of hair. It can be charming."
Far fewer people may be chasing such pieces, says Benjamin, so Georgian jewellery can be good value.
Victorian jewellery is fairly ubiquitous, but it is not particularly well loved at the moment because of its themes of mourning and sentimentality.
"It tends to be more monumental and on a grander scale, and doesn't necessarily fit in with modern lifestyles," explains Ghika. A design must not appear dated and must fit in with the clothing fashions of the day.
Art Nouveau designs, characterised by the use of glass, enamel and coloured stones – Lalique and Guimard are among the most famous names – have a special appeal that resonates with collectors, she adds.
Second-hand jewellery is less expensive than contemporary pieces. It doesn't attract VAT, and if you buy at auction, the commission, or buyer's premium, is likely to be somewhere between 10 and 20%, rather than the 100% mark-up of the jewellery retailers.
There are, of course, good reasons why some people still buy new: the condition and presentation will be immaculate, and not everybody appreciates the 'character' of an antique piece.
If you are buying an engagement ring, the bride-to-be may be more impressed by the ring's sparkle than how well it will keep its value. And it may be easier to find what you want if you buy new. You can even order a bespoke piece of jewellery, with your own selection of gem stones, for example.
It's definitely worth considering jewellery by contemporary artists, which are showcased at the Goldsmiths Fair every October. "These people are individual craftsmen and women, some of the brightest talent to come out of our art schools," says Benjamin. "If you find somebody you really like, and you start to buy their work early on in their career, you could do extremely well once others start buying their work."