Line chart of Gold price ($ per troy oz) showing The price of gold reached new highs after the Russian invasion of Ukraine

When Russian tanks rolled into Ukraine on February 24, there was a near instant impact on the price of gold, which rose from $1,912 an ounce to hit a peak of $2,057 on March 8. Not all jewellers were prepared.

“I was kind of feeling invincible after surviving and almost thriving during Covid . . . the rise of gold caught me with my pants pulled down,” says Arabel Lebrusan, owner of jewellery brand Lebrusan Studio.

The business operates largely on a made-to-order basis to make it more sustainable. “This has always been great for my cash flows — until May this year,” she explains. “This year, the orders [for wedding rings, a core product] didn’t start coming until May . . . I believe everyone’s worries and thoughts were with the people in Ukraine and the overwhelming insecurity that this brought to everyone’s life. But, in May, we were overloaded with last-minute orders.”

By then, the price of gold had dropped to $1,890. It did not help Lebrusan, though. She increased the prices of the jewels in her online store in June, but “it was too late”. “I’m still feeling sorry for myself and months on, I’m still trying to play catch-up,” she says.

Even businesses prepared for such fluctuations have been hit. Pandora, which claims to be the world’s largest jewellery brand by volume, hedges at least 70 per cent of its precious metal prices, based on a 12-month production plan — thereby providing a buffer to protect the business. For Q2 of this year, it hedged on a gold price of $1,818; the realised gold price it paid for the quarter was $1,832.

Column chart of World gold demand by use (tonnes '000s) showing The jewellery industry accounts for around half of global demand for gold

Although the price of gold has never returned to its March high, there have been unpredictable fluctuations since. On July 20, it hit a year-low of $1,704 but then breached $1,800 on August 12. Over the past five years, the price of gold has increased by more than 38 per cent and it is up more than 470 per cent over the past 20 years.

When spikes do occur, the question for many jewellers is whether to pass the cost on to consumers.

“We absorb the changes in gold prices till it becomes too painful,” says Eddie LeVian, chief executive of the fine jewellery brand Le Vian. “We have a policy of only changing the price of jewellery when the price of gold moves up or down in $100 increments and stays there for at least a week.”

Line chart of Share of global jewellery demand for gold (%) showing Over half of jewellery demand comes from China and India

Jewellery designer Judith Peterhoff has adopted “a hybrid model”. She explains: “For ready-to-wear pieces [sold on my] website, I’ve been absorbing some of the cost. When I work on a bespoke piece, I do pass the costs on to my customers, sticking to the quote I get from my suppliers.” To keep costs down for bespoke clients, Peterhoff has been offering designs in less expensive 14-carat gold and 9-carat gold rather than the purer 18-carat gold that is standard for luxury jewellery, but which fewer of her customers are now choosing.

Other jewellers are pushing platinum over gold which, at one point, was 20 per cent more expensive, according to LeVian, but is now tracking at roughly half the price.

Line chart of Gold price as a % of the platinum price showing Gold is now twice as expensive as platinum

Meanwhile, at online jewellery retailer Finematter, sales of silver jewellery have increased 44 per cent in the past quarter.

Peterhoff has been taking advantage of computer-aided design (CAD) technology that allows her to achieve more accurate pricing estimates, and shave off weight more easily. “With the click of a button, I can add or subtract details in a ring, for example, that could make a weight difference of a gramme,” the designer says.

Fluctuations in precious metals prices often influence jewellery design trends. Charlie Betts, managing director at precious metal refiner and supplier, The Betts Group, has already noted an increase in the sale of narrow and lightweight wedding rings.

Other brands are increasing the gemstone content of designs while lessening metal, as gems have a higher perceived value than plain gold. Greg Kwiat, chief executive of diamond brand Kwiat, says: “Our new collections in 2022 included lighter, airier designs. And, where we did use a heavier metal look, we combined that with a more diamond-intensive piece, so that the gold price differential was not as meaningful a percentage of the overall price.”

He notes that sales of heavy gold collections, such as the brand’s Orbit and Cobblestone lines, have “slowed down” due to the price of gold. In response, Kwiat has shifted its marketing focus to its engagement rings “where the diamond value far outweighs the gold value”.

Brands in the mid market are also being affected. At Missoma — which has an annual turnover of£33mn from selling fashion-forward brass and silver jewellery plated with gold — the high gold prices are similarly leading to a move away from heavier designs.

The brand has a minimum gold plating standard of 2 microns and chief executive Marisa Hordern says it will not compromise on this, preferring instead to produce more delicate designs requiring less plating — a strategy she employed in 2008 when gold prices spiked and broke the $1,000 barrier for the first time.

Hordern fears, however, that other demi-fine brands could be tempted to swap to cheaper flash plating, in which a layer of less than 0.25 microns is applied. “It will have an impact on the environment because they won’t last as long, they will be thrown away,” she warns. “Flash plating is more fast fashion.”

Eliza Walter, founder of jewellery brand Lylie, has found a workaround to high gold prices that is beneficial to her business, her customers and the environment. The jeweller sources the majority of her precious metal from dental and electronic waste and, four years ago, started a gold exchange that allows her customers to trade in their unwanted jewellery for credit to spend with her. This provides the rest of her gold supply and trade-in transactions now account for about 30 per cent of her business.

Walter offers her customers 7.5 per cent above the London bullion price as an incentive to send in their jewels. “If they took it to a scrap dealer in Hatton Garden or any high street, they would get the minimum price,” she says, noting that, even though she is offering above-market rates, this is still a financially better deal for her than buying from a refiner. “If we buy metal from customers using our gold exchange, it’s about 30 per cent less than what commercial jewellers are buying their gold for.”

These creative approaches could become more common if prices stay high. However, while this is a cause for concern in some quarters, most jewellers agree that — no matter how high the spike — navigating fluctuating gold prices is just part of the profession.

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