Tuesday, September 29, 2020

A Double-Edged Sword of Gold

All That Glitters

Wow! The predictions came true that gold would hit the $2,000-mark. Gold in fact surpassed that landmark one-day last week! If you were one of those that had hundreds of thousands or even millions of dollars of gold salted away someplace at the purchased price of $1,000 or less, you pretty much doubled or tripled your fortune. 

Then there is the rest of the population. With so much going on in our world it’s not something that affects most people. I’m amazed that a large majority of folks entering my shop these past weeks were unaware of the serious monetary spike of gold—this includes silver by the way! 

Things are tough all over; I’m not going to be redundant about the list of reasons. We are all feeling the effects of what is going on outside our front doors one way or another. Unless of course you are one of the fortunate ones I mentioned in my opening paragraph. 

So, what does it mean? How will it affect the average person? And why did it happen in the first place? I don’t claim to be an expert on the economy or precious metal trading. In fact, many years ago I never thought the price of gold would go over $1,000. Maybe it was wishful thinking… Boy was I wrong with that one. Those of us in the jewelry industry are obviously the first ones hit with precious metal increases and that will certainly affect the people who in the future wish to purchase “fine jewelry. 

Fine jewelry is jewelry that is created with gold 14karat24karat or platinum, and more recently palladium. This high-quality jewelry also includes diamonds and precious gemstones.  

Jewelry created from 10karat or lower karat golds with imitation diamonds or gems is not considered fine in the profession. The purity of the gold used in the production of jewelry as you can see is a very important thing and that is one of the factors of what determines the finished cost. 

Jewelry Purity 101… Pure refined gold or 24karat originally comes from the mines, rivers or even from you and yours for centuries, especially you if you have ever sold your scrap gold in the past. Scrap gold can be remelted over and over to achieve purity and then castedhandmade into new jewelry or to create ingots or bars to be sold on the open markets to investors. 

Pure 24karat gold is not practical to make jewelry out of because in its pure state it is too softbends easily, and that is not a good thing when you want to secure an expensive diamond or gem. In some culturesArabic, Indian, Chinese for exampleinsist on pure gold jewelryAmericans and most European cultures do not. Fine jewelry can be manufactured in 18karat gold alloy75% pure gold and 25% of alloyis added to pure gold to make it stronger and malleable. The more alloy you add, the less the gold purity becomes. 14karat gold is a little over 58% pure gold and the remaining 42 % is alloy. In the case of 10 or 9karat gold, the percentage of alloy exceeds the gold content33% pure gold 67% alloy. A simple analogy would be in the process of making meatballs 67% breadcrumbs and 33% hamburger! You may get something that looks the same, but the breadcrumb and beef ratio makes for a tasteless meatball. 

Recycled gold or the selling of old or scrap gold in 2009, a year after the crash, was 42% of the total gold supplyAn astonishing 1,728 metric tons of the shiny stuff! The reason for this is simple. Economic crises boost precious metal recycling, gold and silver is a liquid asset to raise cash. 

With our current economic situation, I’m told the investors are buying up gold because our U.S dollar is plummeting. Will it change? I certainly hope it does. So please don’t blame your local jewelry stores for future price increases; it will affect everything, even a simple chain repair! After our current stock—which by the way, my current prices are way below the current gold priceof instore jewelry is exhausted, we will be forced in the future to pay the increased manufacturing costs caused by the gold spike. Where and when will it end? 

Jewelers worldwide have absolutely no control over an increasing global gold rush. If it goes any higher, some “experts” are foreseeing a $4,000 market possibility!!! If that happens, newlyweds will need to take out a 15year mortgage just to afford two simple wedding bands; unless they choose a wood or steel band alternative. And worst of all, most Mom and Pop brick and mortar jewelry business will simply not survive at a $4,000 gold market price and they will become a distant memory, and join the ranks of other dying trades. Not all change is a good change. 

Support your local businesses and stay safe and Marco Strong! A little courtesy won’t kill you. 

Richard Alan is a designer/goldsmith and owner of The Harbor Goldsmith, a family business and Marco’s Island jeweler since 1994 he welcomes your questions and comments at www.harborgoldsmith.com. 

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