The fine jewelry industry was put on high alert earlier this week when Bank of America released a new forecast for gold, predicting the metal could exceed $ 3,000 an ounce over the next 18 months. The rapid escalation in the price of gold – which stood at around $ 1,400 at the start of the year – is linked to global and political uncertainties, falling oil prices and massive cash injections from governments seeking to ward off the economic impact of the pandemic. On Thursday, the price of the safe haven metal stood at over $ 1,700.
Rising unemployment and falling consumer confidence aren’t the only bad news facing the jewelry industry right now. If gold almost doubles in value, designers say it will change the trajectory of business and design as they know it today. Many have set $ 2,000 an ounce as a benchmark for when they will have to seriously reconsider pricing and approach. The last all-time high for gold was around $ 1,900 an ounce in 2011.
“I was hoping to wait for that and take lower margins in the meantime because everyone’s income levels are lower. Now is not the time to raise prices because people will not be able to afford it. But if the price of gold continues to rise, we will have to change our prices, ”said Beth Bugdaycay, founder of New York-based jewelry line Foundrae, which relies heavily on 18-karat gold in her designs.
“As the designer and CEO of a company that manufactures and retails, the rising cost of gold is a small but important factor as we navigate the impact of COVID-19,” said David Yurman, co-founder and CEO of his brand. . “Through creative design, ingenuity and technology, we can adapt to a changing environment and manage rising costs. As a retailer, we can reduce our margins to remain attractive and competitive. This is our plan. We have been here before and have successfully passed through difficult circumstances. “
Jean Prounis’ namesake line is based on 22kt recycled gold – an increasingly popular sustainable practice that tracks the same market value as newly mined metals. When his label was created in 2017, gold was hovering around $ 1,100 an ounce. Last year, it soared to around $ 1,500, forcing him to reevaluate prices and explore goldsmithing techniques that allow bulk while requiring less metal weight. “That’s when we had to assess and change to adapt to this market. We work more in the hollow and the pushed back, using thinner plates, ”said Prounis.
The designer, whose line is present at Bergdorf Goodman and several locations in the Dover Street marketplace, believes the industry’s outlook for producing collections will change due to the drastic increase in the price of gold. “Larger pieces can go to a more private order, it’s not something a designer will do for a collection just to have in their inventory,” said Prounis.
While fine jewelry has pushed for a more minimal aesthetic that relies on precious metals, rising costs may force some designers to incorporate heavier stones to create a sense of drama instead. The result could be a new period aesthetic for jewelry, much like pieces designed around WWII when precious metals weren’t readily available and design houses like Cartier relied on stones. semi-precious stones such as amethyst and citrine to make up the majority of their pieces.
“I’m a big fan of stones, they can have a big impact,” said Jesse Lazowski, founder of Marlo Laz. She cautioned, however, that adding many small stones to a design requires more parameters, which increases labor costs. “I think we’ll see a move towards bigger stones all around,” she said.
Diamonds, whose value steadily declines due to a drop in demand, may appear to be better value than gold if the price of the metal continues to rise. “[Diamonds] will feel much lower than gold because they don’t rise like gold. Engagement rings should be really interesting, ”said Alison Chemla, founder of Alison Lou. She, like others, is now looking at a more direct-to-consumer model to increase margins.
Tacori Senior Vice President of Marketing Michelle Chila said that “if this continues we would be happy to design with more diamonds honestly as diamonds have seen their price drop and something with more diamonds in the design. has great appeal anyway. “
Chemla was at the start of what could become a trend for broadcast lines. Its contemporary Loucite collection sells seasonal merchandise like hoops and lucite bracelets that often sell out during the summer months. Chemla plans to expand this category as gold hits historic highs. Prounis is also looking at a cheaper line.
Reinstein Ross, who hired Greek designer Ileana Makri as creative director in November, will launch an 18-karat line this summer in response to escalating gold prices. Previously, the jeweler worked with a minimum of 20 karat gold. “We won’t be compromising on quality, so we’ll move on to more delicate parts,” Makri said.
While Bugdaycay’s Foundrae label cannot deviate from 18k gold, as the brand’s enamel technique requires a minimum of 18k to adhere properly, other labels are considering reducing the purity of their gold. .
“Jewelry has always been based on 18k and a lot of us have gone 14k and some people have already gone 10k. I’m not sure what will happen, but I’m interested to see if that will go over 18 karat to 14 karat and maybe even more people to 10 karat, “Lazowski said.” Carat changes are interesting, big chunks and big statement elements are an integral part of what we do. I’m not going to suddenly do delicate jewelry, ”she added.
Mejuri founder Noura Sakkijha said the company will step up its focus on classic styles. “People want to buy products that stand the test of time more than ever. Everyday jewelry, rather than second-hand jewelry, will become what you want to buy, especially given the rising prices. If people want to buy gold, they will go for more classic designs. Going too trendy with solid gold pieces might not be the time. There are trendy pieces with silver and vermeil that are more avant-garde, ”she said.
Small labels do not have the luxury of stocking up on gold reserves at its current price. Big brands or those with huge venture capital funding have started working on building up their metal inventory.
Aurate, the direct-to-consumer jeweler founded by two former CFOs in 2017, revealed a $ 13 million Series A funding round last June. Co-founder Sophie Kahn said: “One of the things [our production] offers us to produce with current gold prices and pay when it is sold. This way, we can be smart about the increase in gold prices and how they translate to our customers. “
Aurate said if gold increases to $ 3,000 an ounce, that spike “is not linear” to how their jewelry will be priced at retail. The coins, depending on the weight of the gold and the labor involved, could experience a price increase of between 5 and 50%.
Chila said that while Tacori’s main focus is on platinum jewelry, the brand has gold reserves to last between six and 12 months. “We don’t have an inventory backlog in the safe, everything is tailor-made. Price increases would be an issue for retailers, ”she said.
Tacori is not looking to buy more gold, because “it’s impossible for anyone to determine the demand. We don’t know what we’re going to open up to, whether there’s going to be a pent-up flow or a steady flow. We feel very secure with what we have and aren’t planning anything drastic. If anything, it focuses on the funniest part of what we can do to change the designs, ”Chila said.