Talk about the gold standard. The history of the precious metal is marked with incredible moments — Cleopatra’s death on a bed of gold in 30 B.C.; the California Gold Rush from 1848; its use to combat tuberculosis in the Twenties, and gold bonded to microchips in 1961. Fast-forward to 2010 and the big milestone was all about gold prices reaching a record high. Make that 22 all-time highs for the year.
This story first appeared in the August 15, 2011 issue of WWD. Subscribe Today.
The upward spiral continues in 2011. As of press time, there have been 25 all-time highs; the price for an ounce of gold hit a staggering $1,500 in April and then $1,600 in July. Of course, gold’s new reality is impacting the jewelry business, in terms of both sales and design.
“What’s disturbing is not only the fact that the price of gold is going up,” says Andrea Morante, chief executive officer of Pomellato, “but that it’s driven up by non-industry types of reasons. It’s difficult [for the consumer] to understand why it is increasing and what the real forces are behind these increases.”
“If you had a bracelet that was $1,000 five to seven years ago, now it’s $4,000,” notes jeweler Steven Lagos. “It’s not like the customer is willing to spend that much more because the price of the metal went up. It’s really challenging.”
Indeed, not everyone may be as lucky as Morante, who has already nabbed all the gold Pomellato needs for 2011 and roughly 80 percent for 2012. “We’ve bought ourselves two years of leeway,” he says, “although there is the concern of where our price is going to be at the end of 2012. If you don’t take the necessary precautions, [the gold increase] erodes margins.” Morante has found inventive ways to deal with the issue. If you take a close look at Pomellato’s Tango collection, in which diamonds are piled onto thick chain-link necklaces and bracelets, the stones are actually set into silver; only the exposed areas are cast in gold. And the Victoria offerings are “mostly made out of jet, which is expensive but less than gold,” he adds. “And there’s gold around the jet, so it’s not like [the metal] has been abandoned.”
Janet Goldman, ceo and founder of Fragments showroom and jewelry boutique in downtown Manhattan, suggests another pricing approach — averaging the current price of gold with the inventory one already has on hand. “In other words,” she says, “you should be fair to the customer — you don’t want to price yourself out.”
Yet many jewelry companies are still absorbing the cost, even storied firms like the 72-year-old Verdura. “Retailers don’t like it when you change your price more than every six months,” co-owner and ceo Ward Landrigan points out. “So I take it on the chin as the price goes up. I have to make up the difference myself. But that’s the price of doing business. What can you do?”
Plenty actually, judging from the many industry players interviewed for this story. One popular idea is to trade down within the metals market. But Goldman offers a cautionary tale: “I always tell designers, ‘Be who you are,’” she says. “In my store I’ve found that when a company that’s known for gold introduces silver, our customers still come in and want the gold.”
Head designer Tarang Arora of the Indian brand Amrapali had a similar experience. Two and a half years ago, his company launched a lower-priced gold-and-silver collection, with price points starting at $800 retail. Consumers didn’t bite — at least not as much as they did for the pricier gold-and-diamonds merch.
Temple St. Clair, who has stayed the course in her 25 years in business, notes that if her company shifted from gold to other materials such as silver, her clients would be upset. “That’s what our landscape is,” she says. “My clients expect certain metals and materials from me. We’re not doing anything more than maybe adjusting our prices twice instead of once a year.”
Turkish designer Gurhan Orhan has toyed with a slew of alternate metals since gold took a price hike — mixing gold with palladium, for instance, which ultimately didn’t stick. But his collection of silver, launched in 2009, did; sales for the line have gone up 270 percent in the past year alone. Orhan also introduced a less expensive collection that combined 4-karat and 24-karat gold, called 4/24, that hasn’t exactly panned out. “4/24 is still selling,” says Orhan, whose trademark is the pure stuff, finished in ancient techniques and treatments, “but not in the way I expected it to.” He’s now working on a new upgraded alloy for next year that marries 24-karat gold with another karat. “I’m practicing with different metals,” says Orhan, who has added new bronze and 24-karat offerings for this fall.
Also playing the merry alchemist is 24-karat-gold enthusiast Yossi Harari, who, at June’s Couture jewelry show in Las Vegas, introduced a 18-karat brown gold mix that’s 25 percent less expensive than his usual designs. Harari is an early pioneer of the gold-silver hybrid known as “gilver.” What began as a purely creative move in 2004 — he was creating pieces based on Victorian jewelry, which typically used oxidized silver — turned into an economic advantage. “Since my collection was primarily gold, I didn’t want to use sterling,” he recalls. “But I wanted the black background, so I played with metals and came up with my oxidized gilver. When the first recession hit in 2008, gilver really was the saver. Instead of sales going down, we were actually keeping the same level.”
Clearly, when it comes to incorporating alternative materials, there’s no one answer. Damiani is hedging its bets on silver, with a silver and diamond collection called Damianissima.925 launching for fall; Amrapali is introducing a new enamel collection (“there’s a gold base and gold sides,” says Arora, “but less gold overall”), while others are going the titanium route. Lorenz Bäumer, who does double-duty as the jeweler for Louis Vuitton, began offering titanium styles this year for his own collection, while Taiwanese designer Anna Hu has increased her use of the metal from 5 to 25 percent over the last three years. Come December, she will also unveil a new collection inspired by lace-like Chinese embroidery, which employs another less-is-more stratagem in combating gold prices: lighter, more delicate and open designs.
“That’s been going on for some years now,” says David Lamb, the World Gold Council’s managing director, jewelry. “How do you physically reduce the grammage of gold without reducing the impact and compromising the design?” It’s a gambit that can be executed in myriad ways. For Hu, it’s that embroidery motif. For Lagos, it’s his new Interlude line of rings and bracelets, which “deletes” the metal furrows in his signature corrugated style, cutting the weight in half and the price by 40 percent while delivering a similar look. John Hardy, who upped the amount of gold offerings by 30 percent for fall, uses hollow designs inspired by his classic bamboo motif as well as thin gold sheets, hammered using an ancient Balinese technique.
Roberto Coin says that he’s able to create finespun twisted gold wires (seen in his new Ipanema designs) with special machines, while Gianmaria Buccellati of Buccellati maintains that the ever-escalating price of gold hasn’t affected his production, since the house style is based on refined openwork.
Then there are Marco Bicego’s Africa offerings, a series of large gold balls strung into bold necklaces and drop earrings; they’re hollow and, thus, impossibly light in the hands. “Truly, I designed these pieces without thinking too much about the rising cost of gold,” Bicego writes by e-mail. “I wanted to make a strong gold statement. That said, if the Africa collection were solid gold, it would price itself out of the accessible market.”
Back in 1980, the price of gold shot up similarly — to $850 an ounce, which, adjusted for inflation, is roughly $2,445 today. Jewelers didn’t react in the same way; they didn’t have time to. “In the Eighties, people went into shock. It happened so fast, there wasn’t a coherent response,” says Lamb of the WGC. “What we’re seeing now are slow, gradual increases.” Which likely illustrates why, for all the talk about adjusting and staying two steps ahead in this chess game of gold prices, the market is also beginning to see a third reaction, however counterintuitive it might seem: Going for the gold.
“We’ve taken the philosophy of embracing it,” says Monica Rich Kosann. “In fact, we’re taking it to another level of luxury.” She’s talking about her new one-of-a-kind collection of gold and gemstone lockets, priced from $22,000 to $165,000, that launched this year.
“The initial response in 2008, 2009, was a technical one with people taking the gold out,” explains Lamb. “Now, there’s also a sense of gold becoming more of a jewel in its own right. There’s a reassurance and a confidence that comes with gold’s value. People want to buy into that magic of gold. We’re in a world where consumers are going to have deeper relationships with fewer but better things. And that intrinsic value of gold is elevating it above other choices.”
It explains why a silver house like Slane just introduced a new 18-karat gold line — this after closing the gold business co-founders Landon and Heath Slane operated when the market crashed in the fall of 2008. “By nature,” says Landon, “we go in cycles, and if we don’t have something for a while, we want it again.” And though Verdura’s Landrigan says he “would be very happy if the gold price stops rising,” his company’s number-one seller is its classic Curb-Link bracelet, a hefty solid gold piece (priced at $17,950) originally designed for Greta Garbo in the late Thirties. “It’s perceived value,” he says. “The desire enhances because it is an icon.”
As noted by practically everyone interviewed, gold’s centuries-old cachet is key. Along with his mixed metals, this fall Orhan is launching Elements, a collection audacious in its gold usage. He also boosted his established antiquities lineup with a new beaded style. “I was a bit afraid of using more gold and making bigger pieces,” Orhan says, “but this year I did it and they sold the most. People are going for it.”
Perhaps because gold has been deemed precious since antiquity, it resonates on an emotional level as well; consumers view it as a worthy repository for sentimental treasures. “We’re documenting a person’s story in our designs,” says Ohio-based jeweler Heather Moore, who does a strong business in personalized pendants and charms. “That story is priceless.”
Still core to the allure is always that sense of intrinsic value. And the more you pile on — the proverbial stack of bangles, for example — the greater the value. Chinese jewelry designer Juanjuan Hu’s take on that approach includes an impressive 12-piece gold necklace constructed like a TinkerToy set — the branch-like sections snap together and come apart to create variously a bracelet, ring, pendant and brooch. The shape of the necklace itself changes depending on the arrangement as well.
Then there are those who think the gold spike is a blessing. “My customers see the value of gold going up day by day and they think, ‘Oh, this is so exciting,’” remarks Bäumer. “‘Not only is the piece of jewelry beautiful and I enjoy wearing it, but the value of it, through the rising cost of gold, increases every day.’” More often than not, that’s the mind-set of clients for whom price is no object. Anna Hu relates the story of a Chinese-American client in New York, who, when told of the skyrocketing cost of gold snapped back, “Finally, gold is speaking for its voice.”
According to the WGC, despite the prices, gold demand at retail in the first quarter of 2011 was up 11 percent year-over-year, totaling 981.3 tonnes (or $43.7 billion). The jewelry demand alone rose by 7 percent during the same period. The driving engine here: the growing markets of India and China, which together accounted for 62 percent of total gold jewelry demand in quarter one. (Consumption demand is defined as the weight of fine gold content of all new jewelry sold at the retail level.) China’s demand grew by 21 percent from 2010, India’s by 12 percent.
“People are much more accepting of gold prices,” says Amrapali’s Arora, noting that in India, gold still plays an integral role in a woman’s dowry. “We are the biggest producers of gold in terms of jewelry, and we are the biggest consumers of gold.” In fact, approximately 17 percent of the world’s gold jewelry goes toward celebrating Indian marriages alone.
Meanwhile, Hu, who has a boutique in New York’s Plaza Hotel and will open stores in Shanghai and Taipei next year, says that only three out of 30 private orders this year requested more stonework and less gold — and those clients are American.
Taipei-based Cindy Chao notes that while escalating diamond prices are impacting her business much more than the gold spike, neither is stopping her Asian patrons from pulling out the plastic. “The new rich in China,” says Chao, who sells her relatively lower-priced White Label collection at Bergdorf Goodman, “have very different mind-sets than the rest of the world. If they spend money, they want people to see it. They want to flaunt it.”
As Lamb notes, “Our prediction for jewelry and gold is that there will be two directions: Eastward and upward. In America, upward matters. We will see gold leave the hands of the lower and middle market and see it reappear at the higher end.”
This pretty much falls in line with Orhan’s forecast: “If you believe the gold price now is expensive, that’s a big mistake. It will go higher — much, much more. Believe me.”