Gold glitters to $1,000 an ounce
NEW YORK (AP) - March 13, 2008 Gold, which has soared to record levels in the past year, hit a
new milestone Thursday, rising to $1,000 an ounce for the first
time in futures trading - a boon for investors, but a deterrent to
consumers shopping for jewelry.
Michelle Findlay, a manager at a toll operator company in New
York, said she has stopped buying pure gold pieces. Her latest buy
was a silver bracelet plated in 18-karat gold.
"I noticed lately the price has been going up," she said,
while browsing at Gold Panel jewelry store on 34th Street in New
York. "I'll wait, definitely, for the prices to go down" before
buying another gold item, she said.
The price of gold has jumped nearly 20 percent since the start
of the year after rising nearly 32 percent in 2007. The huge
advance is mainly the result of a weaker dollar and record-high
crude oil prices. The dollar fell below 100 yen Thursday for the
first time in 12 years and hit another new low against the euro,
while oil traded above $110 a barrel Thursday.
Lower interest rates - and the prospect of more cuts - bringing
the dollar's value down makes dollar-based commodities like gold
cheaper for foreign buyers. The weak currency has also made gold
more attractive because the metal is a hedge against inflation.
"Interest rates are low and that doesn't help our dollar,"
said Scott Meyers, senior trading analyst with Pioneer Futures, a
division of MF Global.
After topping $1,001 on the New York Mercantile Exchange, gold
for April delivery fell back to settle at $993.80 an ounce on
Thursday. Analysts say gold could still go higher, especially if
the Federal Reserve cuts interest rates again next week as
expected.
When gold becomes more expensive on futures markets, it doesn't
immediately translate into higher prices for jewelry. But in the
long term, the price tags on gold rings, bracelets and necklaces do
go up. Exactly when the increases from this latest jump will show
up on price tags depends at least in part on a retailer's size.
Big retailers like Tiffany & Co. and those that sell jewelry to
large department stores order products up to a year in advance and
keep more in stock. Those stores likely didn't pay as much for the
jewelry when they ordered it, so they wouldn't need to raise prices
as quickly to offset costs.
Instead, since some of those larger stores are already buying
merchandise for the 2008 Christmas holiday season, consumers may
see higher prices toward the end of the year.
Tiffany spokesman Mark L. Aaron said that while there is not a
direct correlation between the rising price of gold and the cost of
its gold jewelry - the labor that goes into a piece is an important
factor - Tiffany does adjust prices based on the cost of precious
metals. If gold keeps rising, a price increase this year would be a
"fair assumption," he said.
Independent jewelry stores, meanwhile, order products closer to
when they appear on the shelves. Patrick J. Murphy, owner of Murphy
Jewelry in Pottsville, Pa., said he doesn't raise the price of gold
jewelry he has in stock but he must when he reorders pieces.
For example, an 18-inch gold chain in stock has a retail price
of $189.95, but if he reordered the chain at the same length,
weight and style, it would be priced at $346.
"That's been our challenge," he said.
When the makers of branded jewelry and accessories raise their
prices, he has to pass the increase on to customers. He cited a
recent price increase by Rolex as one example.
Patti Warshauer, owner of Main Street Goldworks in Half Moon
Bay, Calif., said consumers are buying less, but it's not the price
of gold that's getting to them - it is all the other financial
pressures they're contending with.
"Discretionary income is much more affected by the price of
other things, gas and things like that," she said. "They're still
buying gold if they need it, if it's what they like."
Browsing jewelry stores in New York's diamond district, Kathleen
Pierri, from Smithtown, N.Y., said the rising price of gold might
make her buy less, but "if you really like it, you'll buy it,"
she said.
"Jewelry is a feel-good item, you're going to buy it if you
need it," Pierri said.
Helen Antalg, a jewelry appraiser from Australia, said she was
on watch for a good deal during a vacation in New York. "I'm
looking to see if there's anything that catches my eye and at a
good price," she said.
"I'm tending to go to the pawnbrokers as opposed to the retail
side of things" in order to get better deals, she said, but added
that she hasn't changed her jewelry-buying habits due to rising
prices.
With prices rising, selling those not-so-beloved Valentine's Day
presents or family heirlooms might sound like a good way to make a
few extra bucks. Dave Adelman, who owns two pawn shops in Atlanta,
said he's seen an increase in the number of people coming in to
sell their gold. But he said he can't be sure whether that can be
pegged to gold prices rising or other economic factors.
"When they come in, we don't know whether they're doing it
based on the gold price or because of need," he said.
Whether consumers are buying gold or selling it, Murphy, a
jeweler for 30 years, said he's amazed the price has jumped so
high. He remembers when gold was just $35 an ounce.
"I didn't think we would ever be talking about $1,000 an
ounce," he said. "It's crazy."