Jittery Gold Market Effecting Gold Jewelry Prices?

It’s a jittery time in the gold market.  Prices go up.  Prices go down.   And what does that really mean for lovers of fine gold jewelry?

Two weeks ago, the price was at a peak: $1011 per ounce.  It was a heady time as one analyst predicted that the price “could go as high as $5000 per ounce” in the unsteady market.  I must admit, I reported that here in the gold prices section of the blog because I enjoy watching the wild swings of so-called “experts.”

Gold, as we’ve discussed many times here, is seen as a hedge against inflation and a stable shelter from a market that is unsteady.  It’s a place to put cash that will retain its value and in very uncertain times, even grow.  You can easily understand why its a point of heavy interest during an economic recession such as the one we have just experienced.

In the last month, the price jumped on news about the economy.  First the price seemed to ease back.  That was on reaction to the head of the Federal Reserve suggesting that the recession was over.  The markets seemed to lap that up like a cat with a saucer of milk.

Then the news about unemployment.  We seemed to be having a “jobless recovery.”  That is a situation where the American economy moves forward, begins to expand and grow again, but companies are producing more without calling employees back to work or making additional hires.  The Fed Chairman allowed that “jobs will lag behind,” but this time of “recovery” is discomfiting to most people watching the markets.  And the price of gold went up.

Now economic news seems to show some stability.  And the price softens just a little.

It does somewhat hit you where you live, if you live in a jewelry store.  Prices at ApplesofGold.com have held fairly steady through this.  But what if the price did spike again?  And what if it spiked more than a few dollars?

Apples of Gold prefers to hold its prices steady.  Like most merchants, we’d like to offer high quality product as reasonable prices and serve our customers needs and desires.  If the price of gold skyrockets, if it perhaps doubled, then yes, the prices would reflect that.  So while it’s enjoyable to report on speculative talk from imaginative “experts” on gold, we are glad to see the price trending downward again.

And we hope you are enjoying that view as well.

Price of Gold Per Gram

Determining the Gold Value in a Piece of Jewelry

There is a very simple formula for figuring the base price of gold per gram.

(Price of Raw Gold per Ounce) / 31.1 / 24 x (Gold Karat)

For example, if the spot price of gold is $850.00 per ounce and you want to find out the base price of gold per gram for 14k gold. You would plug in:

850 / 31.1 / 24 x 14 = price per gram of 14k gold.

This would give you $15.94 per gram for 14k gold (For 18k gold replace the last figure of 14 with 18 instead, denoting the gold karat weight you are trying to determine).

This is the value of the raw gold before labor costs added on for gold jewelry, before markups for manufacturing, wholesale, or retail.

In other words, that is the scrap market value of a piece 14k gold.

Determining the Price of Gold Jewelry per Gram

If you are only trying to determine the price of gold per gram in a piece of fine jewelry, the formula is much simpler:

The price of the jewelry item / The gram weight of the jewelry item = Price Per Gram.

For example, if you have a gold chain that is being offered for $725 and it weighs 23.0 grams, you would plug in:

725 / 23 = $31.52 per gram.

This is extremely useful in doing your price shopping comparisons when on the hunt for basic gold items such as gold chains and gold bracelets. This is not necessarily useful, however, in pricing items that are customarily sold by the piece, such as wedding bands, diamond rings, and jewelry with precious stones. The amount of design work and labor and other factors on such items makes them difficult and inaccurate to price based solely on the price of gold per gram.

In the above example, we have determined that the gold chain is priced at $31.52 per gram. By combining our two formulas and determining the value of the actual gold in the same piece of jewelry (when the gold market is valued at $850 per ounce), we can see that $15.94 per gram of the gold chain is actual gold value, while $15.58 is manufacturing and labor costs combined with wholesale and subsequently retail markup.

Or in the above case, taking a $750 23.0 gram chain yields (or in this case, $366.62 of actual 14k gold and $383.38 of manufacturing, labor, and markup).

For further insight into pricing gold, read: Pricing Gold Chains Like Jewelers and Pricing Gold Jewelry, An Insider’s POV.

Featured Products from Apples of Gold

Men’s Handmade 14K Gold Curb Link Bracelet

Byzantine Necklace in 14K Yellow Gold

Men’s 14K White Gold Cross Pendant

Visit Apples of Gold to read more about our Value-Based Pricing Methodology and Jewelry.

Pricing Gold Jewelry, An Insider’s POV

Keystone Pricing

Keystone pricing is taking the wholesale cost of a piece of jewelry and marking it up 100%.

Information site, About.Com, takes this a step further. They advise entrepreneurs:

“A simple formula when pricing for wholesale is to add up your costs (this includes labor, overhead, and supplies) and multiply by 2. For retail, do the same, but multiply by 2.5 to 3.”

In other words, they advise taking not only the cost of the jewelry into account, but also other variable business expenses to determine the net cost of jewelry and then to multiply by 2 to obtain a wholesale cost or 2.5  to 3 times to obtain a retail price.

Keystone refers to doubling the cost of jewelry, whereas triple keystone is tripling the cost of jewelry to determine the retail value (A staggering 300% Mark Up)!

This is not uncommon in the jewelry industry and some jewelers mark up jewelry even higher.

Apples of Gold Pricing Methodology

Where Apples of Gold Jewelry differs significantly from standard jewelry industry pricing is that at best we mark up our jewelry an average of 30% from the cost of the actual merchandise. On select designer pieces, we may mark up select items 40% – 50% (you can call this half-keystone, if you will).

Compare this to 100% to 300% markup of the traditional jeweler, and you will see why customers often call us to ask us how we are able to sell jewelry for so low.

This is where we stand apart from most traditional jewelers and even online jewelers. When comparing Apples of Gold to traditional jewelers we are usually 50% below retail and when comparing to online stores, Apples of Gold Jewelry is an average of 30% lower than most online jewelry competitors.

This leads us to our value-based pricing methodology.

Value Based Pricing

Apples of Gold strives to determine its jewelry prices based on the value that a piece of jewelry creates for our customers. We believe that this is more profitable for us in the long term–as we serve our customers and provide an affordable, quality product.

By selling with greater volume nationally across all U.S. States and internationally across Europe, Asia, Canada, and other parts of the globe, and by limiting overhead, and very significantly not having the huge burden of stocking every jewelry item in-house, we are able to sell at vastly lower prices than most jewelers, while providing a fair valuation of our gold jewelry.

Additionally, we combine our value-based pricing with a “fair pricing” method. “Sometimes it simply doesn’t matter what the value of the product is, even if you don’t have any direct competition. There is simply a limit to what consumers perceive as ‘fair’. If it’s obvious that your product only cost $20 to manufacture, even if it delivered $10,000 in value, you’d have a hard time charging two or three thousand dollars for it — people would just feel like they were being gouged” (entrepreneurs.about.com).

The Bottom Line

Most jewelers have to charge anywhere from 100-300% to maintain a profitable business. With large overhead, shifting gold and metals prices, employee costs, and most costly–expensive inventory–they cannot survive on smaller than keystone margins.

The difference with online jewelers–and especially those who have deep and mutually beneficial relationships with manufacturers and wholesalers, the markup on jewelry will be significantly less, usually not breaching 30%-50%.

At Apples of Gold, we recently were in talks with one of our major suppliers to get lower prices to obtain a 40-50% margin on products that they supply us, and the idea was quickly dismissed–because both we and our suppliers understood that to be competitive in the online environment, such a mark-up is difficult to achieve. We finally settled on a 29.5% margin on items that we purchase from them. So an item that cost us $300, we are selling for about $385.00. A traditional jeweler would normally sell an item obtained at wholesale for $300 for $600 (keystone), or possibly $900 (triple keystone).

That is why Apples of Gold rightly advertises our products are approx. 50% below standard retail (and that is a conservative estimate).

Learn more about Apples of Gold Jewelry and our value-based pricing methodology.

Featured Products in this Post

Men’s 14K Gold Angular Link Bracelet

Sea-Foam Green Amethyst and Diamond Ring

Art Deco 1/4 Carat Diamond Ring

Caedmon Celtic Wedding Band

Featured on ApplesofGold.Com.

Pricing Gold Chains Like Jewelers

Gold chains are by far the simplest types of gold jewelry to price. Learn how to price gold chains like professional jewelers!

The most important thing to look for is the gram weight of the gold chain in question. Once you have determined the gram weight, you are equipped for price comparisons.

Of course, keep in mind that price alone is not always the sole factor. Purchase jewelry only from reputable jewelry stores, and make sure they have a strong return policy, an established reputation, and excellent customer service.

Pricing Basics

Let’s use a 3mm gold rope chain for our pricing model. If a gold rope chain costs $450.00 and weighs 14.0 grams, you can do the math and realize that you are being charged $32.14 per gram of gold that is in that chain.

Quick Formula: Price of Gold Chain / by Gram Weight = Price per Gram.

You find another 3mm gold rope chain priced at $500.00. This chain appears to be $50 more expensive. Upon closer examination, the chain weighs 16.5 grams.  Using the above simple formula:

$500 divided by 16.5 = $30.30 per gram.

The second chain is actually the better deal when you consider the gold content ($30.30 per gram of gold vs. $32.14).

This is hypothetical of course and prices can vary significantly from store to store. We have found that most online jewelers charge an average of 30% more for the same gold chain as Apples of Gold Jewelry.

This is why we are not afraid to disclose what many other jewelers fear to share.

Watch out for jewelers who do not disclose gram weights

Jewelers to stay far, far away from are ones who do not disclose the gram weight of their chains or who use a wide range to list the gram weight–such as, “Chain weighs between 16 – 23 grams”.

There should not be more than a maximum of a 10% variance in the gram weight of a gold chain or substantial piece of gold jewelry. So if a gold chain is advertised at 10.0 grams, it should weigh somewhere in the 9 – 11 gram range (and that is being liberal).

Reputable jewelers will also honor the gram weights of their chains by adjusting the price of a gold chain if the chain turns out to contain a significantly less gram weight than advertised.

There’s Always an Exception to the Rule

There are always a few exceptions. It is often not customary to advertise gram weights of wedding bands, diamond rings, and gemstone rings (although if asked, jewelers should always disclose the weight if available).

The reason being that items such as wedding bands or diamond rings, for example, are not solely based on the precious metals content. Much larger factors come into play, such as design, the labor of love and time it takes to create such rings, and in the case of gemstones and diamonds: the quality and rarity of the stones weigh far greatly than the few grams of gold such rings often contain.

These types of fine jewelry are often sold by the piece, rather than by the gram (don’t be surprised if a jeweler takes it personally when the mistake is made of evaluating such items based on gram weight alone. Just hang your head in shame at this point and swiftly apologize).

Price Matching

Jewelers who want your business will do their best to price match or beat other advertised prices. Of course, keep cool and reasonable. Don’t expect a quality jeweler to match the price of a gold chain you found at a shoddy looking jewelry website whose prices haven’t been updated for 5 years and who don’t provide a customer service phone #. Identify and compare with jewelers’ real competitors to get a better price.

Gold Volatility

Lastly, keep in mind that gold prices can be volatile and the gold chain that you saw advertised at $300 today may soon hit $350 if gold prices continue to rise, as historical gold prices have indicated over the last several years.

Likewise, with a significant downturn in the price of gold, you should expect gold chain prices to decrease over time.

Keep in mind that other factors such as inflation, increased business expense, and the struggle for many businesses to survive in tough economic times, may play a role in determining whether to increase or decrease the price of gold jewelry.

The price of gold is a large determinant of the price of gold jewelry, but it is also often a guideline–not a stringent policy.