Just as oil has a direct effect on the price of a gallon of gasoline, the price of gold has a similar effect on jewelry. Gold started a strong upward trend in 2005 and has almost never looked back. Trading as low as $368.70 per ounce in 2003, gold recently peaked at $1889.70 before settling to $1664.00 at the time of this article.

1. In the open market. Gold trades just like any other commodity and is driven by the market.  It is subject to supply and demand, geopolitical events and the strength of the US dollar. Its price is constantly changing as it’s bought and sold on financial exchanges around the world. Gold is traded in the very same way that you would buy or sell a stock in the stock market.

2. London Gold Fix. The London Gold fix is a widely excepted, long standing tradition that establishes a market snapshot for the precious metal twice a day. As gold fluctuates in the open market throughout the day, jewelers from around the globe use the London fix to determine the selling price for their jewelry. It is much simpler for jewelers to reference this daily fixed price than it is to use the ever changing market spot price. Jewelers in the US typically reference the afternoon London fix which occurs at 3pm London time (9 am Eastern) to establish the daily price of gold.

It’s effect on the jewelry industry

It’s no secret the high price of gold and other precious metals over the last year and especially the last few months has caused some difficult times for jewelers.  As the price of gold has soared, the consumer demand for jewelry has dropped. Add to the mix a shaky economy, consumers with less disposable income and you will certainly understand why jewelers are deeply concerned about their future.
Even though the price of gold is not directly proportional to the price of jewelry, the instability in the price of the metal has made it difficult for jewelry makers to set a selling price for their finished work. Buying gold and other precious metals on one side of a price swing and selling their products on the other, has not been an easy thing for designers to do. This is especially hard for new designers just establishing themselves in the trade, making it difficult for them to understand their material costs and create a pricing model that accommodates the ever changing market.

Other Metals

Looking back there’s no doubt that investing in these precious metals could have been very lucrative, but the dramatic increase in the price of gold has also created a wave of consumers willing to sell their gold items for cash. Jewelers, pawnbrokers and gold refiners will often buy gold jewelry for its gold content and there are many people eager to take advantage of it. However people do need to understand that just because they bought that gold jewelry a few years back for $500.00, that they are not going to cash it in for 3 times that amount. Much of the original price of the item included labor, manufacturing and distribution costs. Also, gold jewelry is only partially made up of gold and contains other alloys and hardening agents.  What someone is willing to offer for any gold jewelry will essentially be determined by the amount and purity of the gold in the jewelry.

What’s on the horizon?

It’s very difficult to tell what will happen to the price.  Some analysts predict gold will trade over $5000.00 if certain market conditions are met, while others think it will stay near its current trading range or even drop in price. Regardless of what happens, jewelers will have no choice but to continually monitor the price just as they always have, and hopefully be flexible enough for their business to accommodate any changes the prices will bring to the jewelry industry.