Climbing Cost of Gold Tests Jewelers’ Mettle

In more than 30 years in jewelry design, John Atencio has built a reputation for heavy rings, necklaces and earrings.

So when gold prices topped $730 an ounce this year, he became more cognizant of how thick his pieces are -- and the accompanying higher costs. Still, although retailers such as Helzberg Diamonds say they’ve seen some designers use less gold in each piece, Atencio has been 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 ... ‘How high is it going to go and are we going to be in business?’ ”

Gold prices have fallen more than 20% since May 12, when they reached a 26-year high of $732 an ounce, but they are still close to $600 an ounce. Jewelers are accepting lower profit margins, feeling pressure to raise prices and sometimes tweaking their designs.

Customers, meanwhile, 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.

Sales totaled $17.7 billion in 2005 amid strong gold prices, a 4.4% increase over 2004. Calnon said he could not release the council’s internal forecast for gold jewelry sales this year.

Nancy Cook, 45, estimates that she visits one of Atencio’s stores monthly and that she and her husband buy six pieces a year. During a special event this spring for some of Atencio’s best customers, she had her eye on a gold and pearl piece but hadn’t decided whether to buy it.

“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, a landscape company owner who lives in suburban Denver. “I also think of it as an investment, because I also have four daughters.”

Despite higher costs, jewelry designer Ippolita expects to sell $20 million in retail gold jewelry this year, which would be a 100% jump, President Lauren Sharfman said.

Gold was $16 a pennyweight, or one-twentieth of an ounce, when the designer’s line, known for gold bangles, was launched six years ago. Now it’s $35 a pennyweight, Sharfman said. New York-based Ippolita hasn’t raised prices on its bangles in six years but is considering an increase this fall.

“It’s very scary when you see it go up uncontrollably. The last three months were pretty scary,” Sharfman said.

Sales also are up for retail chain Ben Bridge Jeweler, said President Ed Bridge. He said the company, owned by Berkshire Hathaway Inc., does not release sales figures.

Still, business is challenging. Since jewelers place orders months in advance, erratic prices have made it more complicated for retailers, Bridge said.

“We’re merchandising now for the holiday season and we have to figure out what gold’s going to do,” he said. “It’s nicer for us if it’s more stable.”