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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."


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