Gold may be hot this year on Wall Street, but you won’t find much celebrating in the jewelry business.
The lofty price of the precious metal, which hit $1,900 an ounce a few weeks ago, has caused a double-whammy for jewelers. It has cost them more to buy new items wholesale, and, in turn, they jacked up retail prices, often beyond the means of many would-be customers.
More Top Picks Buying Advice
The recent drop in financial markets left gold under $1,620, but that’s still about 13 percent higher year to date, and analysts widely expect that investors seeking the metal as a haven will drive the price back up.
“I’ve been in the jewelry business for 26 years, and it has never been worse,” said Celine Cheng, who owns Celine’s Jewelry Inc. in the Loop.
Just about everyone in the business, from mom and pop independents to nationwide jewelry chains, has had to put less emphasis on gold, a centuries-old staple.
“This is a new reality for jewelers,” said Jeff Clark, senior precious metals analyst at Casey Research. “They will have to adjust. There will be some fallout.”
The price of gold has even changed some wedding traditions. Charles Domingue, owner of Diamond and Gold Creations in Chicago, said customers have shifted out of gold for wedding bands into less expensive alternative metals, such as titanium and stainless steel.
Zale Corp., which has more than 1,800 stores in North America, said it’s coping by introducing more inexpensive products, including a Jessica Simpson line.
“There’ll be lots of options in our stores for opening price points for accessible luxury,” Zale Chief Executive Theo Killion told analysts in a conference call. “The Jessica line starting at $80; the promotions that we’re doing with our charm bracelets, which is a new business for us in our brand.”
But it’s the small, independent operators that are hardest hit by the gold boom, especially during a time of economic malaise that already had them and their customers strapped. Merchants along historic Jewelers Row on Wabash Avenue in Chicago lament how slow business has been. They’ve had to increase prices almost daily to keep up with the price of gold. Domingue noted that gold earrings that would have sold for $100 a few years ago now are priced at $200 to $300.
Foot traffic on a recent afternoon during lunchtime was sparse. And some customers were only picking up items they had had repaired.
“I’m doing a lot more repairs now,” said Domingue. “Watches, bracelets, everything.”
The pain is more apparent in the sprawling downtown Los Angeles jewelry district.
Many of the shops and booths in the once-teeming area are empty. As many as 40 percent of merchant venues have shut down, according to a building manager who didn’t want to be identified because he wasn’t authorized to speak on the topic. There are no hard figures from industry trade groups on how many independent shops have closed nationally.
Matt Zivari, who has had a booth in Los Angeles for 13 years, is surrounded on three sides by empty booths that had been occupied by fellow merchants. He is in his 60s and would gladly give up his business if he had another way to make a living.
“There is no hope for me,” said Zivari, who used to do a brisk trade in gold rings, bracelets and charms. “Nobody’s buying. Times were good before, but now there’s nothing.”
Stocking new pieces has become not only expensive but also nerve-racking. Jewelers fear that a sudden reverse in gold prices could leave them with an inventory much like homes underwater — worth far less than what was originally paid.
His peers are similarly bitter at being battered by the precious metal’s current bonanza. Many shop owners pass the time chatting among themselves and snacking.
“The gold prices are terrible,” saleswoman Mary Cohen at the Maxc Inc. store said as she eyed the door for customers. “One tiny chain now costs $200. Who’s going to pay for that?”
Not Ray Douthit, 68, who is a regular at the jewelry district and has had gold rings and other pieces custom-made. Though the retiree still enjoys wandering around the area, he’s holding off on the chunky gold bracelet he’d like to buy.
“It’s out of my league,” he said. “I don’t get the bang for the buck anymore. I want to spend my money where I’ll get the most return, and, right now, that’s not gold.”
The high prices don’t bother Mary Brass as much. The Chicago lawyer was shopping on Jewelers Row on a recent afternoon for a Christmas gift.
“Prices have been higher,” Brass said. “Plus, it’s an investment.”
Jewelers also are seeing more people ask about selling their gold trinkets back to them.
Those offers are sometimes accepted. The items are bought back and sold to refiners who melt them down, said Jeff Roberts, chief executive of the Independent Jewelers Organization. Even more drastic, some jewelers are selling their own inventory to the refiners.
Another tactic is cutting down on the amount of gold in items or blending in alloys, said David Hayman, who runs an eponymous shop in Yorba Linda, Calif.
More Top Picks Best Razors For Men
“The cost of the metal really forces us to refine our designs,” said Hayman, who is the incoming president of the California Jewelers Association. “You can save hundreds of dollars by reinventing something and lightening it.”
But there’s just so much adapting that small dealers can do.
Cheng said her strategy is to focus on better design and service, but she’s not certain that will be enough to compensate for the decline in demand.
“We hope it will get better soon,” Cheng said. “Before Christmas, the demands always goes up.”