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Platinum price plunge brings chances
By Catherine Dayrit
Platinum has long been the high-end choice for
bridal jewelry, but now that the
$2,000-per-ounce prices that raised eyebrows
this past summer have fallen back to earth,
there are new opportunities--and challenges--for
jewelers.
In late January, platinum was hovering at around
$987 per ounce while gold trailed behind at $908
per ounce. The small price difference stood in
sharp contrast to May of 2008, when platinum
prices peaked at almost $2,200 per ounce and
gold topped out at $930.
For retailers, the differential yields a
relatively easy up-sell to consumers: Yes,
platinum is still pricier than gold, but it also
boasts rarity, durability and other intrinsic
values that proponents say bridal consumers,
especially, aspire to.
"Historically, there has been a gap between the
high level of design and sales because the price
of platinum has been a barrier to quite a few
consumers," says Huw Daniel, president of
Platinum Guild International (PGI) USA. "What
we're seeing now is the desire and demand is
still there, but the price has come down. If
you're looking at the price differential, it's
an opportunity for the consumer."
The pricing debate
But for retailers who bought platinum stock a
few months back at the higher prices, there's
also a bit of a dilemma. Should they sell at
lower, market-reflective prices and swallow the
losses, or sell higher, as if the market has not
changed?
"We're pricing at what's fair to the consumer,
and that's the price of the day," says Mel
Wasserman, owner of San Francisco-based jeweler
Zwillinger and Co.
While Wasserman predicts platinum will outsell
white gold at the current lower prices, he says
he's concerned about manufacturers' prices.
"The problem is some manufacturers are keeping
prices like they were in June and it's
ridiculous," he says. "We're dealing mainly with
the manufacturers who have fair prices, not
working with manufacturers who have refused to
change their prices."
After Edmund T. Ahee Jewelers in Grosse Pointe
Woods, Mich., lowered its platinum prices, sales
of the white metal rose from 80 to 95 percent,
says Peter Ahee, company president.
"We will take a loss if we bought something at
the high price," he says. "You take a short-term
loss, but it'll average out."
Mark Danks, sales and marketing manager for
metals refiner Johnson Matthey, which recently
released its Platinum 2008 Interim Review, says
the platinum market remains unpredictable. His
company was forecasting in December that
platinum prices could, within the subsequent six
months, drop to $700 per ounce or shoot as high
as $1,400 per ounce, depending on the economy.
"There's a lot of uncertainty at the moment
about the U.S. auto industry [whose catalytic
converters feature platinum--a major usage of
the metal globally] and if this economic climate
remains, then the effect on industrial demand
for platinum will help keep the price
suppressed," Danks says. "This price should be
attractive to jewelers, but the flip side is
that the poor economy means that there are less
consumers ready to spend cash in retail stores."
Still, Danks says, an improved economy should
see the price following traditional supply and
demand fundamentals for platinum, which are
still strong, sending the prices right back up
again.
"So we might see some price pressure on the
upside," he says.
Both Danks and Daniel link the fall in platinum
prices to the downturn in the global economy.
"We saw a price hike [in early 2008] when there
was a flight to commodities with weakening real
estate and weakening currencies," Daniel says.
"What's happened since September [2008] is the
reverse because world demand for commodities has
declined."
While gold supply has remained ample and prices
erratic over the last year, platinum's prices
are particularly sensitive because of its
tighter relationship between supply and demand,
Daniel says.
According to Daniel, the bridal jewelry market
will benefit more than the platinum fashion
market because fashion pieces are still
considered to be more disposable, and faced with
the recession, consumers are "more likely to
spend on bridal jewelry than on something else,"
he says.
A good amount of the bridal business is also
special order, which means custom jewelers can
set prices on a daily basis and not worry about
months-old stock.
At Edmund T. Ahee Jewelers, salespeople explain
the close differential between white gold and
platinum, as well as platinum's greater density,
purity and wearability, Ahee says.
"We haven't had anybody go back to white gold
after explaining all that," he says.
On the manufacturer's side, J.P.Walrond, vice
president of bridal for industry supplier
Stuller, says the company reprices its products
daily based upon the prevailing global market
prices, and that lower platinum prices as of
late have "rekindled the enthusiasm at the
retail level."
Pursuing other choices
While platinum prices were running high, some
other options emerged, including the one
presented by Karat Platinum of New York, which
manufactures platinum 585 fashion and bridal
jewelry, made of 58.5 percent pure platinum,
copper and cobalt. Since it contains at least 50
percent platinum, it can be called "platinum"
under Federal Trade Commission guidelines,
though the material costs less than 950
platinum, says Michael Ottaway, creative
director.
Karat Platinum has lowered its prices to reflect
current metals prices and is currently buying
more fine sheet metal for manufacturing, Ottaway
says.
"It's been fantastic for us," he says. "Our
intent is not to diminish in any way the value
of 950. Our reason for doing this is to offer
the consumer a choice."
Over in Highland Park, Ill., Jill Garfinkle,
owner of Garfinkles Fine Jewelry, says the store
used to sell a lot of platinum, but platinum
sales have dropped and the business is now doing
much more in palladium.
"Palladium gives you all of the benefits of a
white metal--a lot of the benefits that platinum
has," she says. "Is it as rare? No, but today,
people are very price conscious."
And while retailers who spoke to National
Jeweler saluted PGI's work in marketing platinum
to consumers, Garfinkle pointed out that price
concerns among consumers can't be overlooked
these days.
"Most of my designers have offered palladium,
even if they resisted in the beginning," she
says. "One of my ring vendors said he would
never do palladium and he did. Because if you
don't keep up, you fall by the wayside." |