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The price of gold has soared during the past months (and days). This trend will continue through the holidays. Don't we wish we could see into the future and determine the spot price of gold and/or at the very least study trends, which wll undoubtedly affect both buyers and sellers of jewelry?
All too often, Sellers pay attention to the end cost of product, however, ignore the overall picture, which can and will affect end product sales and profit margins.
The jewelry industry (as a whole) used to sell product based upon craftmanship and quality of gems. The price of gold and silver was not placed at the forefront of the sales pitch. However, a new trend is emerging in which manufacturer's have changed their "sales pitch" to first discuss the spot price of gold (and silver).
Craftsmanship and gem quality are have become secondary in the "sales pitch" to buy now!
No doubt, sellers have to prepare NOW (not a few weeks or even month's from now) for the upcoming holiday season. The price of gold is currently being used by many manufacturer's as a "daily" determining factor in the sale of product.
This goes back to "educating" sellers (whether experienced or not) to prepare for what will come during the coming weeks. There are many factors driving up the price of gold...
Let's go back just a few years (2004 & 2005) and review the reasoning behind the "trends".
- Oil and gas were at all-time highs while metals such as silver went up more than 25% in 2004.
- The accumulation of debt in the United States cannot continue much longer. In the last century the ratio of debt to GDP hovered between 120% and 160%. In 1929 debt rose to 260%. Now the ratio of debt to GDP is at 300% and has been growing over the past year.
- Gold is considered a safe investment, so its price rises when financial uncertainty grows. Gold prices can spike amid war, high inflation, or depression.
- Central banks, especially in Asia, are buying to diversify their reserves beyond dollars and euros.
- Concern about inflation has risen in recent years along with energy prices and US government budget deficits.
- Investors globally have "excess liquidity," lots of cash, driving up the price of virtually every asset, including gold.
- Supplies may be tight. "Net new mining supply out of places like South Africa is running at its lowest level in 80 years," according to economic research by Merrill Lynch, a financial management company.
- All this follows years when gold was arguably underpriced. In the 1990s, its value fell below $300 an ounce as stock markets soared and inflation ebbed.
Preparing your business model (if you're a seller) is important for the future. Our company President & CFO receive every worthy daily and weekly publication in order to determine where the price of gold will be during the next twelve to eighteen month's.
The same goes for buyer's of jewelry. If you're interested in saving money on holiday shopping, take advantage of current pricing on jewelry, as while what goes up - may come down. However, in the current climate what goes up, may just keep going up and/or at the very least, be the excuse for inflated jewelry prices - come the fall.
No, there's no secret formula that will tell you if gold will rise or fall however, keeping a watchful eye on trends in the gold industry can assist those in the jewelry trade in "anticipating" the potential of windfall profits and/or avoiding financial disaster.
You must also look at what you spend in inventory as a "asset". Buying product, month's or years in advance, is a huge advantage over the competition. Those who buy product from manufacturer's or wholesaler's "week by week" can find themselves at the mercy of higher prices.
Also remember that whatever product you'e being sold today was more than likely manufactured when gold prices were much lower than they are today.
The best way to know if you're being taken for that ride is to study jewelry styles. If the style of the piece is one or two years old - then the piece was manufactured when gold was not at an all time high.
Don't fall prey to the "sales pitch" in which you're being told that gold is at an all time high as this might apply to gold bars and coins but NOT jewelry. The wholesaler would have to melt down all the product he has and even in this case, he would not realize the "all time high" of current gold prices.
Ask yourself a question...
Does the price of jewelry go down when the price of gold drops? Good question and if you're in the jewelry trade or a consumer, the answer to this question is usually "no".
So, be prepared for the holidays and subscribe to publications (online or off) which inform you of gold and precious metal prices!
Other guides relating to jewelry and gemstone buying which you may find helpful are as follows:
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