To decide whether investing in gems or precious metals, we first have to understand the whole concept of investment v. speculation. Investment, properly speaking, is putting your wealth to work in a way that what is purchased generates a stream of cash that can be used to pay for whatever is purchased, to provide consumption income, to reinvest in other productive assets, or all three alternatives.
Speculation, on the other hand, is putting your wealth into something that does not generate a stream of cash, generates only a nominal stream of cash, or even a significant stream – but the intent is to sell the asset itself to realize a gain; the income generated by the asset is of secondary importance, if it is important at all.
Thus, if we understand investing in gold, gems, and platinum as purchasing shares in a mining or refining company that produces precious metals or gemstones as its “good,” i.e., that which is produced for sale, then we are – properly speaking – investing in gold, gems, and platinum. If, however, we are purchasing precious metals and gems themselves (or certificates from companies that purchase and hold precious metals and gemstones), then we are speculating. This is because holding precious metals and gemstones does not, in and of itself, generate a stream of cash income.
This is not to say that each strategy does not have its place. When society is relatively stable, the usual strategy is to put most of your wealth into something that will generate income that you can use for consumption income, whether currently or in the future (i.e., “save for retirement”). In that case, it’s also a good idea to put a little something in precious metals as an emergency fund. Do not, however, purchase certificates that say you have a claim on precious metals in someone else’s hands – take actual possession of the metal, whether in coin or bar form.
A good rule is never to consider jewelry or gemstones as an investment or even a speculation. The markup on jewelry is far above the value of the metal in the pieces, and they are luxury items. As such, they tend to lose value very quickly when resold. Gemstones – diamonds being the most popular – are also an artificial market, with the price being controlled by a cartel. If the cartel decides to raise its prices, you will make money, if not, you will lose.
When society is unstable, however, putting one’s wealth into gold or, if your wealth isn’t all that great, into silver (a more volatile commodity, but less expensive and more easily traded for consumption goods in many cases) can be a good strategy. Platinum is somewhat equivocal – it is not a “traditional” precious metal, and, in the event of a financial collapse, might be harder to convert to consumption goods when it comes down to survival. It lacks the “mystique” of gold and silver. Having your wealth in the form of easily-transportable gold is also an excellent strategy if you believe that you may have to flee the country, and need to take your wealth with you.
If you have no intention of fleeing the country, however, but you believe that a financial collapse is imminent, consider purchasing a small truck farm – and learn how to live at a subsistence level. During the hyperinflation in Germany, Austria, and Hungary following the First World War, farmers and small artisans were the only ones who survived with any security (possibly why, when order was restored, the Nazis passed punitive laws against farmers by abolishing private property in land). As one farmer commented, “Before the war, the city people used to look down on us farmers. Now they come to us with their baskets of worthless paper money, begging for help.”
Overall, then, a good strategy to pursue might be to put a good amount of your wealth into “blue chip” stocks that pay good dividends, with a healthy amount in an emergency store of precious metals, and a small, mortgage-free truck farm that will give you a place to live and feed you in the event of a collapse – and give you a summer “getaway” if things get better.