Gold prices create a divided market

October 01, 2007

Bangles in 18-karat yellow gold by Maya Jewels; suggested retail price is from $11,000 to $13,000.

By Mary Wisniewski

New York—The higher price of gold has created a two-tiered jewelry market in the United States, finds the latest World Gold Council (WGC) report.

While buying remains strong in both the middle- and high-end gold-jewelry markets, especially when the goods are innovative and feature strong designs, the mass-market consumer is rejecting higher-priced gold jewelry as too expensive, the report says.

At press time, the price of gold surpassed $730 per ounce—a 28-year high.

Anne Neumann, an appraiser at Harold Weinstein Ltd. Gemmological Laboratory in Toronto, says it makes sense that designer jewelry would be less affected by price increases in gold.

"People are buying the design," Neumann says, adding that gold's feel-good appeal makes it a timeless favorite, whatever the price.

U.S. gold-jewelry demand fell 4 percent last year in terms of tonnage, but was still up 2 percent in dollar terms.

Philip Olden, managing director of the WGC's global jewelry group, says the sub-market for gold (at price points of $100 and under) is not doing as well because it's difficult to maintain lower price points. On the plus side, Olden says, gold sales are still breaking records, and there's a stronger drive for quality gold.

"The quality is much better, rather than [gold being] commoditized," Olden says. "Consumers are getting used to the higher price points."

Rebecca Garnick, marketing director for Long's Jewelers, says gold jewelry is still selling well in the jeweler's seven locations in Massachusetts and New Hampshire. The trend toward yellow gold and innovative new pieces from designers has eased consumers past the price issue, and even non-branded items continue to sell, she says.

Frank Heger, owner of The Aspen Goldsmith in Aspen, Colo., says higher gold prices are not affecting his sales either. He credits this to carrying and selling designer jewelry, and says that ultimately, the price of his jewelry has more to do with craftsmanship and the addition of new stones rather than gold prices.

"Metal is just a metal," he says.

At Birks and Mayors, gold-jewelry sales are steady, but the chain has made a few adjustments to keep profits consistent, says Allison Gladen, Birks and Mayors' group divisional vice president for fine jewelry, and Christie Pina, the chain's category manager for gold and collections.

Although sales in gold were slightly down last year, they have since picked up, and there is now no discernible difference between branded and non-branded gold jewelry sales, the executives say.

"All mid- and entry-level price points are doing well," Pina says.

"Hydrangea" necklace and "Gold Dream Catcher" earrings, both in 18-karat yellow gold, by J. Han; suggested retail price is $5,225 and $2,175, respectively.

Sometimes, to justify the price of gold, diamond embellishments are added to enhance value to the customer. In addition, to keep sales going strong, Pina and Gladen say they sometimes choose lighter gold and renegotiate the price with the seller. They will also maintain a stronger marketing approach this year.

David Sternblitz, Zale Corp.'s vice president and treasurer, says there may be a trend of designer gold pieces selling more strongly than mass-produced items, but he also attributes declining gold sales on the lower end to a drop in interest from consumers.

"It's less of a price issue than a lack of interest," Sternblitz says, adding that this trend has occurred across Zale's various divisions.

To deal with declining interest in gold, he says, Zale Corp. division Piercing Pagoda is mixing more metals like silver and steel and using less heavy gold. Zale is also marketing to a younger crowd by offering lower price points and fresh fashion looks.