Jewelers, customers watching gold prices

June 25, 2006

DENVER -- After more than 30 years in jewelry design, John Atencio has built a reputation for heavier rings, necklaces and earrings.
When gold prices topped $730 an ounce earlier this year, he became more conscious of how thick his pieces are -- and the accompanying higher costs.
Still, while retailers such as Helzberg Diamonds say they've seen some designers using less gold in each piece, Atencio is reluctant to change his style.
"When it got over $700, then the red lights were going off," Atencio said. "Then it was kind of like: 'God, how high is it going to go and are we going to be in business?' "
Gold prices have fallen more than 20 percent since May 12, when they reached a 26-year high of $732 per ounce, but are still close to $600 an ounce. Jewelers are accepting lower profit margins, feeling pressure to raise prices and sometimes tweaking their designs.
Customers are still coming. U.S. sales actually seem to be rising, said John Calnon of the World Gold Council.
"It's a counterintuitive approach," he said. "With gold in the news constantly, the consumer is thinking about gold."
U.S. prices for gold jewelry are more dependent on the design rather than the gold itself, he said, and customers tend to buy it for adornment rather than as an investment. The gold council predicted that lower-income customers would buy within their budgets, while affluent customers might even buy more.
Sales were $17.7 billion in 2005 amid strong gold prices, a 4.4 percent increase from 2004. Calnon said he could not release the council's internal forecast for sales this year.
Nancy Cook, 45, estimates she visits one of Atencio's stores monthly and that she and her husband buy six pieces a year.
"I have noticed a difference in prices, but if I like the piece, I really don't worry about the price of gold," said Cook.