The rise in the value of gold and other precious metals has been a boon to many client portfolios, but advisors would also be wise to consider the impact on their jewelry. If clients have not adjusted their insurance to account for the higher prices, they could be in for a surprise if their keepsakes are lost or stolen.

The rise in the value of precious metals and gems has been dramatic in recent years. Since September 2000, the price of gold has nearly quintupled. Kitco, a large precious metal retail and research firm, reports that gold has appreciated more than most other investments during the past ten years (See Figure 1).

Some experts warn of a price bubble-similar to the inflationary mania that impacted technology in the 1990s and residential real estate less than ten years later. But other experts say the price of gold has found a strong level of support near $1,200 per troy ounce and could continue to rise into 2014.

The upward trend has brought a corresponding increase in the prices of some other precious metals. Silver has almost matched gold's rise and the price of platinum has nearly tripled over the past decade. 

While most gold investors know the price of gold on any given day, they and most other people may be unaware of how the price of gold and other precious metals affects the value of their jewelry and collectibles.

Roger Ponn, a 40-year veteran in the appraisal business, cites as an example the jewelry collection of a longtime client. In 2004, the collection was valued at $384,000. This year, its value had risen to $682,000, solely due to the price spikes in precious metals and diamonds over the past six years.

Another high-net-worth client family saw its 400-piece jewelry collection increase in value by 45% over two years, he says.  
"Quite a few of the handmade pieces were of 22-karat and 24-karat gold, with 24-karat of course being pure gold," Ponn says. "Higher karat content means faster price appreciation when precious metal prices rise-it's similar to what occurs with gold bullion and gold coins, which appreciate at a more rapid pace than most gold jewelry simply because they are pure gold."
Ponn and other valuables appraisers have encouraged their clients to increase their insurance correspondingly, but industry statistics show that many clients have not followed this advice.

Of those owning a valuable collection, such as wine, fine art, jewelry or antiques, nearly half (47%) said they did not have special insurance coverage for their collections, according to a survey by Trusted Choice, a trade association for independent insurance agents.

This trend is borne out by other studies and independent appraisers.