Fred Zivari sells gold jewelry at Latinas Jewelry Plaza in downtown Los… (Anne Cusack, Los Angeles…)
Gold may be hot this year on Wall Street, but you won't find much celebrating in the jewelry business.
The lofty price of the precious metal — it hit $1,900 an ounce a few weeks ago — has caused a double-whammy for jewelers. It has cost them more to buy new items wholesale, and in turn they jacked up retail prices, often beyond the means of many would-be customers.
The week's big drop in financial markets left gold under $1,650, but that's still nearly 16% higher year to date, and analysts widely expect that investors seeking the metal as a haven will drive the price back up.
Just about everyone in the business, from nationwide jewelry chains to mom-and-pop independents, has had to put less emphasis on gold, a centuries-old staple.
"This is a new reality for jewelers," said Jeff Clark, senior precious metals analyst at Casey Research. "They will have to adjust. There will be some fallout."
Jewelers have been pushing alternative metals, such as titanium, palladium, tungsten carbide and even stainless steel, said Amanda Gizzi, spokeswoman for the 6,000-member Jewelers of America trade group.
Zale Corp., which has more than 1,800 stores in North America, said it's coping by introducing more inexpensive products, including a Jessica Simpson line.
"There'll be lots of options in our stores for opening price points for accessible luxury," Zale Chief Executive Theo Killion told analysts in a conference call. "The Jessica line starting at $80, the promotions that we're doing with our charm bracelets, which is a new business for us in our brand."
But it's the small, independent operators that are hardest hit by the gold boom, especially during a time of economic malaise that already had them and their customers strapped. Although there are no hard figures from industry trade groups on how many of the independent shops have closed, the damage is apparent in the sprawling downtown Los Angeles jewelry district.
Many of the shops and booths in the once-teeming area — which encompasses several buildings near Pershing Square — are empty. As many as 40% of merchant venues have shut down, according to a building manager who didn't want to be identified because he wasn't authorized to speak on the topic.
Matt Zivari, who has had a booth for 13 years, is surrounded on three sides by empty booths that had been occupied by fellow merchants. He is in his 60s and would gladly give up his business if he had another way to make a living.
"There is no hope for me," said Zivari, who used to do a brisk trade in gold rings, bracelets and charms. "Nobody's buying. Times were good before, but now there's nothing."
Stocking new pieces has become not only expensive but also nerve-racking. Jewelers fear that a sudden reverse in gold prices could leave them with an inventory much like homes under water — worth far less than what was originally paid.
His peers are similarly bitter at being battered by the precious metal's current bonanza. Many shop owners pass the time chatting among themselves and snacking.
"The gold prices are terrible," saleswoman Mary Cohen at the Maxc Inc. store said as she eyed the door for customers. "One tiny chain now costs $200 — who's going to pay for that?"
Not Ray Douthit, 68, who is a regular at the jewelry district and has had gold rings and other pieces custom-made. Though the retiree from Running Springs still enjoys wandering around the area, he's holding off on the chunky gold bracelet he'd like to buy.
"It's out of my league," he said. "I don't get the bang for the buck anymore. I want to spend my money where I'll get the most return, and right now, that's not gold."
Other regulars still visit the shops, but not to buy — they instead ask about selling their gold trinkets back to jewelers.
Those offers are sometimes accepted. The items are bought back and in turn sold to refiners who melt them down, according to Jeff Roberts, chief executive of the Independent Jewelers Organization. Even more drastic, some jewelers are selling their own inventory to the refiners.
Another tactic is cutting down on the amount of gold in items or blending in alloys, said David Hayman, who runs an eponymous shop in Yorba Linda.
"The cost of the metal really forces us to refine our designs," said Hayman, who is the incoming president of the California Jewelers Assn. "You can save hundreds of dollars by reinventing something and lightening it."
Other merchants are operating on smaller margins, lowering commissions for salespeople and relying more on income from jewelry repair work.
But there's just so much adapting that small dealers can do.
"We're not doing anything here, just wasting time," said Shirly Zivari (no relation to Matt), co-owner of Latinas Jewelry Plaza in the jewelry district. "We're trying to sell gram by gram for minimum profits — it's too much work for too little payback."
During too-frequent lulls between customers, she checked property listings on a laptop. Zivari said she was thinking of cashing out and, like some of her former neighbors in the jewelry district, investing her money in real estate.
"We're looking for a change," she said.