Friday, September 9, 2011

We Buy Gold Frenzy

Stainless Steel Cocktail Ring with Swarovski Cubic Zirconia by B. Tiff Designs

There are many gold buying companies out there right now. The concept is simple, a company purchases gold from individuals based on a percentage of current gold values, they in turn melt it down for use in other jewelry or resell it to a processor who does the dirty work. It appears to be a win-win situation. The seller gets rid of their old or broken gold jewelry that they no longer wear and the buyer gets a good price on gold thereby reducing the cost of newly minted jewelry for the consumer. But do they really?

As a wholesale buyer of jewelry, I’ve seen pricing on jewelry go up and down with the market. The market has seen some steep pricing increases and decreases over the past few months.  Gold has hit historic highs and this is reflective in the price of new jewelry that the average consumer sees at most jewelry stores. It does smell a bit like a scam.

If these gold buying companies are truly reducing the cost of repurposed old jewelry, why does the price of wholesale new jewelry go up and down with the market? It’s because most gold buyer need the difference from what they paid the seller and what the price of gold is when they resell, it’s their profit. The real concern with all of this buying and selling of gold is if the bubble bursts. Just like the housing market, and the tech market, the gold market could take a dive. This can occur if too many people holding gold begin to sell in large groups. Large sell offs can force markets down and when the price drops dramatically there will be people left holding the worthless bag.

I personally hate all these fluctuations in the metal markets. It makes it hard to calculate what something will cost month to month. Since I am a retailer, I’m more concerned with my customer’s perception of my pricing. It is difficult to explain to a customer that a bracelet they admired as part of a set is now 10% more because the manufacturer is charging according to metal pricing on a particular day.

On the bright side, the large increases in precious metal pricing have fueled an interest in alternative metals, such as stainless steel and titanium. We are seeing more designs in less expensive metals which have kicked off new creative designs in jewelry for consumers. Many of these alternative metals are featured in the more edgy and contemporary designs. Creativity is what keeps jewelry designs fresh; a necessary alternative is what brings creative designs to the consumer. I guess it is a win-win situation.

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