Precious Metals:Data & Statistics
Gold Prices Continue Downward Trend
Here's hoping your eyes don't glaze over when a savvy customer asks why
you haven't lowered your gold jewelry prices to reflect lower gold commodity
prices in the past year.
You may have numerous reasons. But what your customer may find interesting
is that your suppliers have lowered prices little if at all. It wouldn't
hurt to offer this customer a quick lesson in jewelry industry economics.
While gold commodity prices have fallen by $100+ from two years ago,
another equally important but rarely considered factor plays
a major role: price volatility. The range of gold prices widened to near-record
levels in 1997 ($84.80 separated the highest and lowest prices, says the
World Gold Council). That's quite a change from the relatively stable prices
of the past decade. And no one manufacturer or retailer wants
to lower prices for stock merchandise today if he or she has to pay more
tomorrow to cover higher commodity prices.
Price volatility continues this year (see chart) and will remain a factor
for several reasons. First, producers are trying to shore up prices so they
can pay to repair and expand old mines and develop new ones. Second, prices
will continue to face downward pressure as long as there's a strong dollar
(which makes stocks more attractive than gold to investors). In addition,
the market fears some European central banks may dump their gold reserves
to jump-start their economies, plus there's uncertainty over what role gold
will play in the European Monetary Union's effort to launch a single currency.
Copyright © 1998 by Bond Communications.