The jewelry business has been good to Dennis French over the past 18 years.
The 52-year-old Salem, N.H., resident has made enough money to help him and his wife put the first of three children through college, with plans to do the same for the other two.
But lately things have taken a turn for the worse. The skyrocketing price of gold combined with a slowing economy have conspired to slow business to a crawl.
"I'm hanging in there because I'm a small shop and my overhead is small," said French, who owns Stateline Jewelry at 341 S. Broadway. "But if this continues I'll have to look at whether I want to keep doing this. Up until a couple of years ago, I made a living at it. At this point now, I could do something else and make twice as much."
Across the Merrimack Valley — and the rest of the country, for that matter — jewelers find themselves in a bind as the price of gold, silver and platinum reach record levels. In the past five years, gold has gone from around $350 an ounce to $975 an ounce. A gold chain that sold at Stateline for $300 just two years ago now sells for $800 or $900, French said. And as prices have gone up, U.S. demand has plummeted.
Francisco Marcelino and his brother Benny Grullon, who own Brothers Jewelers of Lawrence, closed their Winthrop Avenue store on Friday and moved all their inventory to a smaller shop they have on Jackson Street.
"The economy's bad and gold is high," said Marcelino. "Unfortunately, gold is not something you need. That's what killed us."
He and his brother took over the jewelry business from their father, who'd been in it for 22 years. They opened the Winthrop Avenue store 31/2 years ago, when gold was selling for around $450 an ounce. Since then, it's more than doubled in price.
"Gold is the highest we've ever seen it," Marcelino said.
Weak dollar
There are several reasons for the price hike, and they can almost all be traced to the state of the U.S. economy, said James Cavistan, an independent North Shore registered investment adviser.
"Gold is perceived as a safer place to invest," he said. "When the U.S. investment market is strong, nobody buys gold. But when the U.S. market gets sick, people buy insurance — which is gold."
As investors leave the stock market to buy gold, they are dumping the dollar in favor of stronger currencies like the Euro and the Japanese Yen. That has further weakened the dollar and, since gold is traded in U.S. dollars, the price continues to go skyward.
Rapidly growing economies all over the world are also going for the gold.
"The rest of the world is booming," said Cavistan. As foreign economies grow, so does their demand for gold, as it is used in everything from computers to catalytic converters. Meanwhile, as consumers in those economies earn more money, they are buying more jewelry.
"People in India are huge buyers of gold," he said. "It's a cultural thing, so demand there is high."
All this makes it tougher on U.S. retailers, who are forced to pass the price increases to their consumers.
French noted that men's wedding bands, which once sold for around $195, now go for about $300.
Buying gold
Archie Deflorio, owner of Cash for Gold on Route 28 in Salem, N.H., plays both ends of the gold market: When gold is cheaper, he sells jewelry wholesale to shops all over the region. When it starts to get pricey, that market dries up, so he begins buying gold, and selling it into a slightly different market.
"We are constantly buying," said Deflorio, who's been in the business for nearly 30 years. "Buying is good now."
He said people with gold coins and jewelry are cashing in on the rising price.
"People look around their house and say, 'I don't need this anymore, let me turn it into a tank of gas or a mortgage payment,'" he said. "If they're not going to use it, or it's broken, it's a smart thing to do."
If the jewelry is in good shape, he said, he'll hold on to it and sell it to a retail jeweler once the market bounces back.
"Broken jewelry goes to the refinery," he said. There, it is melted down and sold for jewelry making or industrial use, like computer manufacturing. He said he makes money in this market because he moves such a large volume of gold. Typically, he takes about a 10 percent profit on each transaction, which isn't much, except that he's buying and selling so much product.
Deflorio said that as the recent price of gold has surged, gold buyers are cropping up all over the place — some of them unscrupulous. They buy gold for as little as possible, then turn around and sell it for as much as possible — taking advantage of sellers who don't understand the true value of their gold jewelry.
"A fellow came here to sell a chain that was worth $250 to $300," he said. "We paid him $250. He told us he had been to a local pawn shop, which offered him just $80."
He urged caution to people unloading their heirlooms: "Where you sell your jewelry is just as important as where you buy it."
