An elderly couple recently walked into a Washington auction house clutching a bag of pearls, diamonds and gold jewelry -- family heirlooms that had been gathering dust in the woman's jewelry box.

They walked out with $20,000 -- the money they needed to make a down payment on a condominium.

Selling off the family jewelry has always been protrayed as the last resort. But these days, gem dealers say, rare and valuable objects handed down from generation to generation are being exchanged for an even rarer commodity: cash.

"They're coming out of the woodwork," said Bernie Esterman, whose shop in Montgomery County's White Flint mall attracts a wide spectrum of sellers.

From the wealthy socialite who tires of her hand-me-down cameo brooch to the young couple who decide that granny's diamond tiara is not their style, "everybody," Esterman says, "has something in the family jewel box to sell."

Diamond stickpins, Victorian lockets, emerald-studded crisses, gold anklets circa 1955 wedding bands and disengaged engagement rings: baubles and bangles and bittersweet memories are exchanged every day for much-needed currency.

"It's said," said one dealer. "Eventually the idea of handling down pieces from one generation to the next, keeping it in the family, will end. People just can't afford it."

There are several reasons for the sudden surge in activity, dealers say. The most obvious is inflation and the current case crunch. Many sellers simply need extra cash during the Christmas season.

But another incentive, observers agree, is the publicity surrounding the record prices being paid for precious metals and gems of all kinds. Although gold has received most of that publicity, diamond prices also are soaring to record highs, supurred on by moneyed buyers using gems as a hedge against inflation.

For example, says gem appraiser Antonio Bonanno of Silver Spring in 1973 a flawless one-caret diamond could be bought for $1,850. Today the same stone is worth over $37,000.

"That's what you call jumping up like nobody's business," Bonanno says. "Some people are selling because they have to but others realize that now's the time to get top dollar for it."

Bonanno also says many rich customers are contributing to the current "diamond fever" by purchasing gems at auction prices and then donating the stone -- after it is appraised at a much higher value -- to a museum as a tax write-off.

Although diamonds and other gems are a good investment, they are becoming a long-term luxury fewer people can afford.

"People come in here crying," said Richard Baube, a Falls Church jeweler. "They have boxes and boxes of stuff. Sometimes they want more than we can pay."

Many people are selling their jewelry through classified newspaper ads, hoping to get a higher price than the dealer is offering.

"Times are hard for everyone," said, one professional woman who advertised her gold-encrusted watch this week.

Aside from the obvious need for cash, many older people are unloading the family silver because no one else wants it.

"It's often stashed away and never used," said Henry R. Duryee of the Georgetown Silver Shoppe. "Some of them don't have children and others aren't interested in it."

Duryee said he is seeing more people these days "desperate for cash. They may be older people who need money to go into a nursing home, or young women with small children whose marriages have broken up."

At some of the auction houses, intermediaries often are used to disguise the identity of the seller. "Some famous person doesn't want her name to get out as being financially insolvent," Antonio Bonanno says. "It's a very peculiar business."

At Sotheby Parke Bernet auction house in New York, business is booming.

People are turning their family heirlooms into cash without batting an eyelash. "With so mach pubicity," said jewelry manager Dennis Scioli, "they might be more likely now to take the stuff that's been lying around for years out of the vault and turn it into cash."