Jewelers ponder gold rush

TUPELO – While the price of gold has settled some after reaching a high of nearly $1,900 an ounce last week, it’s still high enough for people to continue to cash in on their jewelry, coins, bullion and even dental work.
Among the businesses buying gold are jewelry stores, which have seen a steady wave of sellers.
“People come in every day to sell their gold,” said Patty Thompson, owner of Way-Fil Jewelry. “They’ve brought in old jewelry, coins … someone even brought in a silver bar.”
The story’s the same at Stone’s Jewelry, where owner Treasa Smith said she’s never seen so many people selling their gold in her 36 years in the business.
Gold has been on a meteoric rise during the past four years. In October 2007, two months before the Great Recession officially began, it was trading at about $740 an ounce. By July of this year, it had jumped to nearly $1,500 an ounce. Gold’s Monday record closing price of $1,891.90 an ounce marked a 28 percent gain in less than two months.
Driving part of that gold rush were investors shifting money into what they believe are less-volatile assets like bonds and gold.
The run-up reminds many of the first big gold price rush in the 1980s. Prices soared to $800 in early 1980 as inflation rose sharply. However, gold tumbled to about $300 by mid-1982 and did not revisit $700 until 2006.
But the recent gold-selling binge also has resulted in lower gold jewelry demand. According to the World Gold Council, demand in the U.S. fell 8 percent – to 21.7 million metric tons – in the second quarter of this year, compared to a year earlier.
In terms of value, demand rose 15 percent to $1.1 billion, mostly reflecting a 26 percent increase in the price of gold during the period.
“The combination of high unemployment, frail economic growth and stubborn inflation pressures produced an environment that was not favorable for gold jewelry demand,” the WCG said in its Gold Demand Trends report for the second quarter.
Overall, global gold jewelry demand rose 5 percent in the second quarter, and has risen 6 percent for the year.
Jewelers in Northeast Mississippi say they haven’t seen much drop in demand, however.
Carroll Little, owner of Little’s Jewelers in Corinth, Tupelo and Columbus; Jackson, Tenn. and Florence, Ala., said custom-designed jewelry is as strong as ever, even with the high price of gold.
“We’re very strong in bridal, and when it comes to that, people are still buying,” he said.
Way-Fil’s Thompson said her custom-designed jewelry also is doing well, with the price of gold having little impact on the customers looking for a unique look.
A more affordable alternative is silver, which has grown in popularity like other “white” such as white gold and platinum. But silver – trading around $40 an ounce – offers a similar look for a fraction of the cost of other precious metals.
But yellow gold is still the metal of choice for consumers. What worries many jewelers, however, is if gold continues to go up.
“Some of our vendors are telling us it could reach $2,500 an ounce by the end of the year,” Thompson said.
That puts jewelers in a tough spot. They don’t want to tie up too much of their cash in buying gold, but they also have to make sure they don’t scare off customers by raising prices too much.
Smith said isn’t sure what will happen if gold resumes its upward trek.
“We didn’t raise our prices because we’ve had a good inventory,” she said. “But once we have to replenish that inventory, I don’t know. We thought we were selling well at $1,200 an ounce. … we may have to eat those higher prices.”


dennis.seid@journalinc.com


Dennis Seid/NEMS Daily Journal