Champaign, Ill., jewelers say gold's rising price has not hurt business

CHAMPAIGN, Mar 24, 2008 (The News-Gazette - McClatchy-Tribune Information Services via COMTEX) -- -- Jewelers say the public's appetite for gold jewelry hasn't abated, even though the price of gold has climbed from $600 an ounce a year ago to $1,000 an ounce earlier this month.

"We're still selling; it's amazing to me," said Jim Greenfield, president of Spritz Jewelers in downtown Champaign.

"It hasn't hurt business," said John Reed, president of Reed Diamonds & Design in Champaign.

But the spiraling price has complicated business to some degree, prompting jewelers to adjust prices, buy old jewelry from customers and sell inventory to be melted down.

"The only headache really is the existing merchandise on hand," which has to be repriced, said Lois Wacholtz of Christopher's Fine Jewelry Design in Champaign.

It's extra work, but retailers have to stay on top of it so items being sold can be replaced at current costs, she said.

At Browne's Fine Jewelry in Champaign, manager Kari Johnson said she keeps an eye on gold prices to make sure the price of jewelry reflects what it would cost to replace the piece.

"When we get new pieces in, adjustments are made, but it's not like the entire store goes up," she said.

Precious metal prices have been climbing for some time, with the steepest runup occurring since January. Gold topped $700 an ounce last September, broke the $800 mark in early November and topped $900 in late January. It took only six weeks for the price to climb above $1,000 hitting a high of $1,002 an ounce in mid-March before dropping to the $925 range last week.

Other precious metals have fetched record-high prices as well: Silver, which was selling for $12 an ounce last August, briefly topped $21 an ounce this month before falling to the $17.20 range last week.

Platinum, which sold for $1,600 an ounce in January, climbed as high as $2,252 an ounce before settling in the $1,860 range.

Palladium soared as high as $579 an ounce this month before dropping to the $440 range.

Greenfield said he believes much of the run-up in prices is tied to economic instability, the soaring price of oil, the decline of the dollar and the Federal Reserve's interest rate policies.

The dollar hasn't been tied to gold since 1971, and people sometimes trust precious metals more than they do dollars and other paper currency, he said.

"Gold has always been gold. It's always been precious, and we continue to see a desire for it," Reed said.

Young couples getting engaged are still buying gold rings, but the mounting is not as big of a purchase as the diamond, Greenfield pointed out.

Reed said some people talk about buying jewelry as an investment, but he sees jewelry more as a piece of personal property that can be worn and enjoyed. Eventually, it can be sold and the seller can reclaim all or part of its value, he said, but he doesn't view it as an investment the way he would view Microsoft shares.

"Gold still remains one of the best-valued luxury items in today's market," Wacholtz said. "It doesn't require a maintenance contract and doesn't require you to feed it fuel at ever-increasing prices." Robert Laible, owner and president of Robert's The Fine Art of Jewelry in downtown Champaign, said the escalation in gold prices has affected his bottom line. He said he's been absorbing the increases rather than continually raising prices.

"I try buying low and keep buying low," he said, "and I've reduced my purchases because of that." But the higher prices haven't deterred customers.

"Our custom work has not slowed, which absolutely astounds me," he said.

Meanwhile, some jewelers find they're often acting as buyers, as well as sellers, of jewelry.

"We've been buying old gold or scrap gold old class rings, broken chains and we're paying by weight," Greenfield said. "We're making a lot of people happy." The same is true at Browne's. "More people are coming in to sell old jewelry," Johnson said.

With gold prices so high, Greenfield said he's used the opportunity to get rid of some unsold inventory.

"I've been going through old stock. It's more beneficial to sell some of the items in stock and melt them down," he said. He sells the jewelry to refiners who can prepare the gold for other uses.

Greenfield said that in jewelry, gold is often alloyed with other metals, such as copper, brass or nickel, for color, stability, function and wearability. Fourteen-karat gold, for example, is about 58 percent pure gold, he said.

Despite last week's fall in commodity prices, Greenfield isn't sure gold has reached a peak.

"Some people say it's going to the $1,400 level without a problem," he said.

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