Up till now, China and India have been the leading markets for gold jewelry, accounting for 54% of the global physical take in the first six months of the year. But with the 30% or so collapse in gold's price this year, U.S. consumers are using the opportunity to buy more, too. 

Domestic sales are on track to hit their highest level in three years, with industry analysts at Thomson Reuters GFMS seeing fourth quarter demand surging 15% to 20% to reach 44 to 48 tonnes. Because jewelry represents some 43% of global demand for gold, they anticipate it will regain some of the market share it's lost over the past 12 years during gold's massive bull run.

While miners such as Barrick Gold (GOLD 3.39%) or Newmont Mining (NEM 12.46%) remain dicey ways to play the precious metal's recovery, and exchange-traded funds such as SPDR Gold Shares (GLD 0.60%), though popular, give you only paper instead of actual gold, some feel gold jewelry has the twin advantage of providing a tangible investment vehicle along with deriving pleasure from wearing it.

Yet like life insurance, where most people are probably better off with term insurance instead of whole life because it doesn't mix insurance's investment potential with its risk mitigation capabilities, most gold investors shouldn't mix business with pleasure, either. Buy gold jewelry to wear if you want, but don't consider it an investment. 

Where an investor buys a coin that contains a full troy ounce of gold, he is paying for the gold content in it. A piece of jewelry, on the other hand, may have some inherent value of its own, but it will always be inflated beyond its gold content because of the artisanal premium that goes with it. You're always paying more than what the actual metal is worth. 

Because of the structural weaknesses the world's central bankers have built into the global financial system, my conviction in the strength of the yellow metal as a good long-term investment remains intact. And because gold is ending the year lower in value than where it started for first time in more than a decade, consumers are flocking to jewelers to buy more. That might make Tiffany or Zale attractive investment possibilities, but it doesn't argue for gold jewelry as an investment.

If the you-know-what hits the fan because those structural financial inequities finally cause the system to crumble, selling jewelry with its unreliable provenance will be decidedly more difficult compared with selling an American Eagle or Canadian Maple Leaf gold coin.

Gold's price hovers around the $1,200-per-ounce mark, a delicate price point because it represents the metal's marginal cost of production. Although it's dipped below that level on occasion, miners such as Barrick, Newmont, and Newcrest Mining have cut jobs and reined in capital expenditures to balance the scales. Those with the highest costs are also closing mines and shelving expansion, and I recently outlined how those miners such as IAMGOLD (IAG 3.06%) and AngloGold Ashanti whose all-in sustaining costs hover around or above the cost of production have led them to cut their dividend.

So by all means invest in gold. I prefer physical possession in the form of coins or bullion as the best option, though there's an argument to be made for miners such as Yamana Gold (AUY) that have ridiculously low all-in sustaining costs. Even an ETF in some cases can be justified (I own shares in one, too), though the case is much weaker. But for anything other than its adornment value and the enjoyment you'll get out of it, avoid gold jewelry as an investment, as it will ultimately tarnish your portfolio.