Monday, April 15, 2013

Falling Gold Prices Won't Save Any Money on Buying Gold Jewelry and Here's Why

Gold prices are declining precipitously today.

The pricing freefall is not likely to end anytime soon. Accordingly, the best advice for investors is to refrain from buying now and for those who do own gold, you may wish to strongly consider selling it on any kind of rebound before gold prices subsequently start falling again.

{NOTE: In the spirit of full disclosure, I own no gold now, never have owned any and have no intention of owning it in the future.}

But what about the price of gold jewelry? If gold prices are falling, shouldn't the price of gold jewelry be declining as well? Well, as a matter of fact, no.

And here's the story as told in Why Gold's Tumble Won't Save You Any Money at the Jewelry Store:

"Gold futures have plunged 13% since Thursday, but don’t expect that gold necklace you’ve been eyeing to go on sale.

“The mark-ups on jewelry are massive,” said Mark O’Byrne, director at GoldCore, a physical gold retailer, in Dublin. “If you buy a ring or necklace or wristband, you’ll pay a premium for workmanship and craftsmanship.”

That premium typically ranges from 200% to 500%, market participants said.

In addition, jewelers typically buy their materials in advance, meaning that any drop in the futures price won’t be reflected in their bottom lines for several months. For those reasons, “I wouldn’t see (the recent tumble in gold prices on Comex) having any material impact on the price of jewelry,” Mr. O’Byrne said.

Gold for June delivery on the Comex division of the New York Mercantile Exchange was recently 9.2% lower at $1,362.70 an ounce.

If prices drop another 10%-25%, then jewelers might lower prices, Mr. O’Byrne said. But “that is if the jewelers pass on the margin” at all, he said. “Smaller jewelers may have to lower prices, but if you’re a luxury jeweler, then they would tend to keep the prices up more.”"

Summing Up

If you're looking to buy gold jewelry, wait a couple of years.

Gold prices look like they have a long slide ahead of them, and eventually the price of jewelry will come down, too.

The key word in the preceding sentence is "eventually."

Thanks. Bob.

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