For Shoppers, Price of Gold Not Worth Its Weight

Not many people have come in to buy gold jewelry at Chas Schwartz & Son lately. But plenty of customers have arrived with gold baubles to sell -- class rings, wedding bands, even gold teeth.

Owner Paul Pastor said the shift is just one of the many changes in his business in recent months as the price of gold has soared to records. He's stocking cases with cheaper alternative metals and encouraging shoppers to buy jewelry with more gems and less gold as rising prices begin to squeeze his margins and send customers into sticker shock.

"Right now, the metal market is having a devastating effect on the jewelry business," Pastor said.

The weakening dollar and troubles in the financial markets drove the price of gold to an all-time high of $1,028 an ounce Monday, nearly four times what it was just a few years ago, as investors have sought out havens for their money. Gold has pulled back since then and closed at $919.50 yesterday in global trading but surging demand from emerging markets such as China and India suggest that the prices will not fall substantially any time soon.

David Beahm, vice president of Blanchard, a large retailer of precious metals, has seen a 120 percent increase in gold bullion sales this year as financial institutions and traders have been stockpiling gold coins in their safes.

Platinum, another key metal, has experienced an even more dramatic spike, soaring above $2,200 an ounce, largely due to disturbances in South African mines, which produce most of the world's supply.

Such costs are causing havoc across a wide range of industries. The auto industry relies on platinum to make catalytic converters. Oil refineries need platinum to turn crude oil into gas. Computer manufacturers and even dentists are also being affected.

But perhaps nowhere are the increases more painfully felt than among jewelers, who must cater to the often volatile emotions of their clients while trying to maintain their bottom line.

"For certain unique purchases in one's life, people don't want to feel they're sacrificing," said Matthew Rosenheim, president of Tiny Jewel Box on Connecticut Avenue. But "there's a higher investment that needs to be made for them to get the products that they desire."

Standing inside his store in Dupont Circle, Rosenheim recalled when gold went for about $260 in 2002. But as prices spiked, he noticed that customers who normally shopped the store's pricey first floor were migrating to the less-expensive merchandise on the second.

Now, one of the most popular lines has become David Yurman's Silver Ice collection -- bracelets, necklaces, earrings and rings that set gemstones in sterling silver. The pieces are priced between $1,000 and $5,000. The same merchandise in gold would cost at least twice as much, Rosenheim said. Prices of other gold pieces have risen as much as 15 percent.

"We try to keep price increases very small, and we will absorb some of it ourselves," Rosenheim said. "But we will be forced to pass it on at the counter as well. I think that's inevitable for all jewelers."