The Rising Price of
Gold and Retail Jewelry
Gold has soared recently to
levels not seen since the 1980s. From $430 per ounce in April 2005 to
approx. $550 an ounce towards 2005 years’ end, to $750 per ounce near 2007
year's end, and to the much anticipated $1,000 per ounce in 1st quarter
Both wholesale and retail jewelry prices are on the rise, as gold jewelry
retailers update their prices to reflect this great increase. The question
is, how soon and how hard will higher gold prices hit the jewelry
This will greatly depend on the type of jewelry store and how quickly they
have systems in place to change their jewelry prices. A change in gold
from $900 an ounce to $975 will not dramatically change things in the
But for a discount jeweler who charges by the gram, a difference of $75 per
ounce can make a decent difference. This will translate to almost $1.50
per gram for 14k gold. A gold chain weighing 20.0 grams for example will
now cost the retailer an additional $30.00 to purchase. And this is
assuming that the same jeweler does not mark-up this new increase to say,
$45 instead of $30! Retailers who base their prices on keystone pricing,
for example (doubling the price that they pay to their supplier), can be
expected to see a $60 rise on that same chain, instead of $30, if they
maintain keystone pricing. Some jewelers even charge double or triple
keystone (marking up a piece of jewelry 2 to 3 times its wholesale value).
This translates to an approx. 10% increase in the cost of raw gold, and
therefore a minimum of 10% for finished retail jewelry. Assuming keystone
pricing, this could translate to a 20% increase in finished jewelry, when
gold changes from $550 per ounce (December 2005), to $600 per ounce (April
If gold were to reach $800 per ounce, the consumer could expect an
additional 33.3% increase in the price of raw gold, assuming a price shift
from $600 per ounce to $800, or a 45% increase in the price of raw gold if
assuming a price shift from $550 per ounce to $800 per ounce. This could
mean a price increase in the retail jewelry world of anywhere from 33.3%
if no additional mark up is made by jewelers on the increase in the price
of gold, or an over 65% increase in retail jewelry if jewelers maintain
keystone pricing (which is a standard minimum for most traditional, brick
and mortar and some online jewelry retailers).
How will this effect online jewelers?
Online jewelers are often selling their gold jewelry at discount prices,
and so this price shift will be played out differently for online
Although online jewelers will feel a price increase from their suppliers,
many do not charge keystone pricing, and so the price shifts may not be as
dramatic as they will be at brick and mortar jewelry stores. Most online
jewelers also do not have to contend with stocking merchandise and so they
will not have to anticipate the realities of rising costs into their
current pricing structures. Traditional jewelry stores may have to sell
their gold jewelry at a slight premium in order to anticipate rising gold
costs in the near future, in order to cover themselves when restocking
items. This will much depend on how traditional jewelry stores choose to
face the challenge of rising gold prices.
Since an online jewelry store has lower overhead, they will be most
readily able to maintain lower, discount jewelry prices and since they
often do not stock jewelry, but drop-ship from suppliers, they will not
have to anticipate rising costs, but can more easily sell in “real-time”.
The online stores that will be hit the hardest are the smaller, mom and
pop jewelry stores who do not have the technology and work force in place
to change their items' prices quickly enough to meet the rapidly changing
price of gold.
In the past, gold may have stayed at $500 per ounce, or near it, for many
months at a time, giving online jewelers ample time to go into their
websites and change their hundreds--or sometimes thousands of items. Now,
with weekly and sometimes dramatic daily changes in the price of gold, it
may be more difficult for online jewelers to change their prices fast
enough to meet customer demand.
This may serve as an advantage to jewelry shoppers when gold is on the
rise, and they may be able to find bargains before a website owner has
time to go in and change their prices. It may prove a disadvantage to
consumers when gold prices fall back and jewelry website owners do not
have enough time to go back in and lower their prices in order to remain
Apples of Gold Jewelry's Response
Apples of Gold Jewelry, anticipating dramatic changes in gold prices had
custom programs built for our jewelry website of over 2,000 jewelry items.
Our programs (scripts) allow our administrators to rapidly change prices
on over 15,000 published web pages at the click of a button through an
algorithm that tracks the price of gold and updates prices based on
current gold prices.
Websites like ours will have current and up-to-date gold jewelry prices,
compared to smaller stores who have to go in and manually update thousands
of pages—which can take weeks—or more likely months for stores with more
We also do not sell at keystone prices,
but maintain a more modest jewelry mark-up of approx. 35%-50% vs. 100% -
300% compared to traditional jewelers. So our prices are much lower for
the same quality gold jewelry.
Online jewelry stores still remain the most cost effective form of jewelry
buying, especially now that gold prices have soared and are expected to
soar. This may mean increased business for online jewelry stores, if
traditional shoppers are willing to cross the threshold into online sales.