Southern Jewelry News

The Retailer’s Perspective

17:31

March

2008

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Article Autor: Chuck Koehler

Dealing with $1000 gold!

Okay, it’s really only $920 today, but if I bought an ounce of gold from you today and I paid you with a thousand dollar bill, you wouldn’t give me enough change for me not to notice I just spent a thousand dollars. What’s a jewelry store owner to do? I was sitting around wondering that very thing right after the first of the year when my phone rang... and rang... and rang... and rang.

Because I have a trade shop that does business nationwide, a lot of other national trade shop owners started calling me asking what I was doing about my prices in lieu of gold shooting through the roof. The one consensus that we all agreed on was we (trade shops) were the first ones to take the hit.

During Christmas and the aftermath of the season, every time I sized a ring up using my price list at $500 gold I was losing money. And, since I’d already noticed that I was losing money on each sizing, I immediately began to realize that America is getting fatter because I averaged 5-1 on sizing rings up over sizing rings down. Of course, a lot of manufacturers are making their pieces in a size 5 now instead of a 7 to lower the cost to the retailer. Once again, the trade shop takes the hit.

So, in January, several of us made the decision that our prices have to go up. Granted, on basic stuff like soldering a jump ring, repairing a chain, and sizing simple rings down the price only changed by a dollar or two. But sizing rings up is a whole new ball game today.

There’s not a bench jeweler out there that hasn’t in the last two months sized a ring up where the cost of the gold you added was worth more than the ring. Any trade shops (or retailers) that want to see what we came up with to be fair and competitive, yet not lose money can go to my website,
www.CMKCompany.com, and log into the CMK side and go to my price list. You can see where your repair prices need to start heading. But, enough about me. Let’s talk about you!

Way back in 1980-1981 the same thing happened to the price of gold. Did it come back to $400 eventually and stay there for 15-20 years? Yes. A lot of us survived the last spike of this magnitude and a lot of us will survive this one. But, some won’t. So what should you know to deal with it? To answer that question I started calling all my peeps around the country to find out what different business owners and managers are doing about $1,000 gold and here is some of their responses.

Bill Sites, owner, Sites Jewelers and Ward Potts Jewelers, Nashville and Clarksville, TN. “The price of gold going that high makes it more precious and it makes people want it more.” (Bill would make a great politician by the way) Bill told me that this is not the season to buy, so it’s not affecting him in any measurable way at the moment.

Wayne Clark, manager, EJ Sain, Nashville, TN. “It hasn’t really affected us yet, but we’re getting ready to go to Tucson and we’ve made a decision to not buy any gold while we’re there. But, we have raised our repair prices.”
Thomas Barnes, owner, Thomas Barnes Fine Jewelry, Victoria, TX. “Not affected at all by it at the moment. Maybe in mid-summer when we’re starting to buy for the fall and Christmas seasons it will have an effect, but not now.”
Lisa Morehead, owner, Masman Jewelers, Morgantown, WV. “It hasn‘t really affected us yet, but we will be going through after inventory and re-marking gold items up based on our replacement cost.”

Janelle Nissen, Rogers Jewelers, Cedar Rapids, Iowa. “We’ve had several price increases on our branded lines and have marked up our merchandise to reflect our replacement cost several times as gold and silver was increasing in price.”
Now on the other side of the equation is the refiners. How is this spike affecting them?

To get to the bottom of that I called United Precious Metals Refining outside of Buffalo, NY. I had the pleasure of taking an extensive tour of this facility last year. After I got through the metal detector, gave up my ID, got the magic wand passed over me and my shoes and my hair, and signed my name in three places I was shown the inner workings of a high security refining facility.

For starters, so many hands have to touch your material that the controls over the materials are stringent and absolute. The security is tight and impressive. I’ve used United many times in the past to handle my refining needs and have always been pleased with the results. But, for the rest of you, sending off tens of thousands of dollars of precious metals to someone you don’t know is daunting to say the least.

How do you know if you’re going to get ripped off? How do you know if you’re going to get a fair settlement? How do you know if the refiner you chose is reputable? All good questions mind you, but you want to know something? Those are the exact same questions that customers walking into our stores want to know about us.

I’ve always said that a jeweler handling diamonds is like a bank teller handling money. It’s just a diamond. I’ve got lots of them. A refiner handling your gold is just like you handling a customer’s diamond. It’s just another diamond to you, and it’s just another batch of gold to them. It’s work. If you could take the tour like I did you’d be absolutely certain that it’s safe, secure, and accurate... every time.

So I called up and talked to Vinny Guadagna, the President of United Precious Metals Refining. I asked him what this spike was doing to his business. Vinny and I talked at length, so I’m going to paraphrase some of his responses.

Vinny told me that the one thing he is noticing more than anything is jewelry stores scrapping out stock and turning it into cash. I asked him how the buying and selling was being affected and he said that it wasn’t really a factor. Vinny told me that there is a fast enough turn-around that everyone is buying and selling based on today’s gold price which is pretty close to yesterday’s gold price. The only real effect it has had on their business is that they have had to add additional staff to keep up with the demand of everyone selling off their gold and silver.

So, in conclusion what I’ve learned is that it’s really a non issue today. It’s a bump in the road, not a life changing phenomena.

But, what about when it turns around? I was only 19 the last time this happened and was in jewelry school at the time and don’t really remember what happened when gold turned around and went the other way. I didn’t own a store back then, so I’m really curious what’s going to happen when I buy merchandise at $900 gold in July and it drops to $400 by Christmas. Anybody out there that remembers how you handled it in the ‘80s it’s your time to shine. If you have any advice about how to handle the downturn that is sure to come, contact me at info@southernjewelrynews.com and we’ll pass along all the knowledge we can.

Oh yeah, and any other refinery that wants to fly me in, put me up in a fancy hotel, buy me dinner and take me on a tour of your facility, I’ll write about you too.

Chuck is the owner of Anthony Jewelers in Nashville, TN. Chuck also owns CMK Co., a wholesale trade shop that specializes in custom jewelry and repair services to the jewelry industry nationwide. You can contact him at 615-354-6361, www.CMKcompany.com or send e-mail to info@southernjewelrynews.com.