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Gold Prices Plunge Amid Interest Rate Fears

by John Sealander

Will Lower Gold Prices Result in Higher Sales of Gold Watches?

Investors watched nervously as gold prices fell precipitously after Federal Reserve chairman Ben Bernanke hinted that the central bank might reduce its bond purchase program this year and possibly even end it in 2014. The dramatic 5% drop on Thursday, June 20 extends a 28% decline that began on October 4, 2012.

With gold prices at a two-year low, luxury items made from the precious metal are starting to fly off the shelves in jewelry stores from Macau to Mumbai. In this part of the world, gold has always been an important part of the local economy and gold bracelets, necklaces, rings and coins are highly desirable. Locals see the plunging price of gold as a ‘once-in-a-lifetime’ chance to buy the items they have always desired. Some jewelry stores in Macau are already reporting sales figures that are three times higher than normal.
Gold Rolex Watch

Gold Prices and Luxury Watches

Ironically, the plummeting price of gold has not yet resulted in increased sales of luxury watches. A solid gold timepiece remains one of the most desirable of possessions, but don’t expect today’s lower gold prices to result in lower prices for your next gold watch. Retail jewelry prices are not traditionally market driven, especially when it comes to luxury watches. Since much of the gold used the gold watches you see in the stores today was purchased earlier when prices were higher, it is impossible for the price to accurately reflect the current price of the raw metal.

A fine gold watch is generally priced by the design, craftsmanship and reputation of the watchmaker, which adds considerable value to the gold. Does the price of gold impact the selling price of a gold watch at all? It certainly does, but it can take a long time for the falling price of gold to significantly reduce the retail price of an 18K gold watch.

If gold prices stay low, or drop even further, the prices of many gold watches will certainly decline. The price will have to stabilize at these low levels to have any lasting impact, however. Many in the watch industry see falling gold prices as a good thing. When gold prices are extremely high, a gold watch is out of reach for all except the extremely wealthy. Sustained low gold prices might actually signal the return of the gold watch as a retirement gift or wedding present.

According to Samuel Friedmann, President of Gevril Group, a fine gold watch will remain highly desirable, whatever the current price of gold in the financial markets. “A gold watch is a family heirloom that can be passed from one generation to the next”, says Friedmann. “It finds its true value in the memories it creates and contains.”

About Gevril Group

Gevril GroupGevril Group is the exclusive US representative for select European watch brands, distributing and servicing luxury, fashion and sports timepieces at a wide range of price points. Gevril Group also operates a full-service watch repair department staffed by master Swiss watchmakers. Contact Gevril Group by email or by calling 845-425-9882.

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