Retailers say the escalating price of gold on the market won't show up in jewelry stores until at least next year.

Gold's surge not likely to cost holiday shoppers

December 01, 2005|By ANDREA K. WALKER | ANDREA K. WALKER,SUN REPORTER

The recent surge in gold prices may have some people second-guessing whether to buy that special someone a gleaming new watch or bangle bracelets, but experts said there's no need to worry about escalating jewelry costs - at least not yet.

The price of gold rose above the $500-per-ounce threshold briefly Tuesday for the first time since 1987 and has been on a steady ascent all year, increasing 16 percent since January. Yesterday, it closed down $4.50 to $494.60 on the New York Mercantile Exchange.

The gold price has been influenced by a number of factors, including a 55 percent increase in worldwide demand for gold jewelry, supply from mining firms and investors who see it as a safer investment than the stock market or other avenues.

But gold and retail experts said the higher costs won't show up at jewelry stores until at least next year, bypassing the important holiday season when retailers try to discount - not raise prices - to draw in customers.

"I don't think retailers will raise prices at this very important season," said Clifford Jackson, marketing manager for Jewelers of America, a trade group that represents 11,000 member stores. "The industry does try to absorb the cost first before passing it on to the consumer."

Most jewelry stores evaluate their prices quarterly and base them partly on the price of gold at the time, according to the World Gold Council, a marketing organization funded by gold mining companies. So the inventory on jewelers' shelves now is based on gold prices a month or more ago and not on this week's highs.

"We don't change our prices on a daily basis according to the price of gold," said John Dickinson, who handles the custom department for online jeweler James Allen. "Industrywide, they wait to see if a metal price holds or continues to escalate. After a while, if it appears to be more than just a blip, then they might change the prices."

When gold rapidly reached a record high of $850 an ounce in 1980, many jewelers were forced to raise prices.

The same was true last year when platinum rose faster than the industry had anticipated. Platinum also peaked this week, rising above the $1,000 mark on Monday for the first time since 1980.

"When it was $850, there was a big surge in people buying and selling gold," said Ken Hash, a buyer for Smyth Jewelers in Timonium, recalling the 1980 surge against the weakened dollar. "Wholesale prices went up, and the stores that were in business had to almost adjust their price daily. Gold was leaping by $40 and $50 some days, so it was all over the place. With this little surge, I don't expect it to impact prices now."

But jewelers acknowledge that jewelry prices could jump in the future, especially if the price of gold continues to climb, although no one can predict just how high it might rise.

"We don't change our prices on the morning price of gold, but over time we do what's appropriate," said Mark Aaron, vice president of investor relations for Tiffany & Co., the famed New York jeweler. "I can't predict what we would do down the road. Eventually, if it keeps rising we might have to raise prices.

Earlier this year the company raised prices on some jewelry because of higher platinum and diamond costs, Aaron said.

Many elements beyond gold go into the pricing of jewelry, experts said. Pieces that have more detail or are custom-made cost more. And labor in certain parts of the world is more expensive than in others and is reflected in the price of some jewelry. Jewelry prices wouldn't necessarily rise 30 percent just because gold did, analysts said.

"It's not a 1-to-1 situation," said John Calnon, U.S. managing director of the World Gold Council. "Gold is just a part of the cost of a piece of jewelry."

Many retailers try to absorb the increase in cost before passing it on to consumers, analysts said. They'll use less gold in a piece, make jewelry that combines different types of metals or use a leather collar or silk cord rather than a gold chain on a necklace.

"We've found historically, designers find ways to compensate for higher prices," said Hedda Schupak, editor-in-chief of Jewelers' Circular Keystone, a trade publication. "There are definitely ways to compensate for it."

andrea.walker@baltsun.com

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