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Gold Prices Fall, but Not at Jewelers

Gold fell below $1,600 an ounce today — its lowest price since October, but jewelry shoppers may not see any savings in time for the holiday season, analysts say.

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In fact, pushing back that engagement ring purchase to Valentine’s Day might not help too much either, they say. That’s because it takes four to six months before a shift in gold prices will affect the price of jewelry, says Susan Thea Posnock, a spokeswoman for Jewelers of America, a trade association. “The retail price of a piece of gold jewelry is affected by much more than the cost of the gold,” she says.

The price of jewelry, like a necklace or ring, also takes into account the labor used to make the piece, the cost of craftsmanship, design and the brand name, says Posnock. And consumers shopping now for holiday gifts are perusing merchandise that’s been marked up due to a steady rise in the price of gold over the spring and summer, she says.

Retailers with long inventory cycles, meaning they sell merchandise long after they’ve acquired it, are also more reluctant to lower prices, says Paul Swinand, a retail analyst for Morningstar. High-end retailers are also less likely to lower prices substantially, even when competitors have already made cuts, he adds: “They don’t want to lower prices because it would dilute their brand,” says Swinand.

After reaching record highs this summer, demand for gold tapered off in recent months as investors sold their stakes in the yellow metal in order to hold more cash during bouts of stock market volatility. Recent concerns about a potential liquidity crisis in Europe sparked another round of selling, sending prices down.

To be sure, if prices continue to drop, most jewelers will eventually have to follow suit, experts say. Consumers will fight back, leaving merchandise they consider too pricey on store shelves, says Swinand. Demand for gold jewelry was down 10% in the third quarter compared to a year earlier as soaring gold prices tempered demand, according to a report from the World Gold Council, a trade group.

But before postponing that gold necklace purchase into late 2012, keep in mind that gold prices, like most commodity prices, can be fickle, says Swinand: “Right now [gold prices] are falling but you don’t know where they’re going to be next summer.”

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