Stable market adds sheen to platinum sales in 2005

Following two years of volatile, rising prices, the platinum market will be calmer in 2005, say experts, providing a stable basis for healthy sales of jewelry and watches made from the metal. Supporting those sales are new programs for retailers and a strong spotlight on platinum, as worn by style setters and celebrities.

Price Rise. After hovering between $350 and $450 for many years, platinum's price per troy ounce began climbing early in this decade, the result of a weaker U.S. dollar, stronger demand from Asia (especially China), some concern about supplies, and speculation by investors. One-day highs cruised through the $500s in 2002, the $600s to $800s in 2003, and hit a 24-year high of $937 in April 2004. Then, after some ricocheting, the price settled into the high $800s. The monthly average for 2004 came to $848, double that of a decade earlier ($494 for 1994). (At press time, the average price for January 2005 was about $860.)

The price rise had a global effect on the platinum jewelry business. Purchases in 2004 for jewelry manufacturing dropped 10 percent worldwide (to 2.2 million ounces), the lowest in seven years, says Johnson Matthey, the leading supplier of platinum to the jewelry industry. The tumble was largely the result of a sharp drop in purchases by China's jewelry trade because of the price. However, the firm says North American demand for platinum in the jewelry market also fell (5 percent, to 295,000 ounces), and there was some loss of market share to white gold in the mid- and lower-price segment of the market. (Its 2004 interim report, released in November, notes that despite the lower demand, some Italian jewelry manufacturers increased exports to the United States last year.)

A Stable 2005. Johnson Matthey expects platinum prices to remain stable—or possibly even drop—at least during the first half of 2005. The firm expects daily per-ounce prices to range between $760 and $880. One reason is a surplus of the rare precious metal for the first time in six years (6.43 million ounces total). Other reasons are expanding output from mines in South Africa, Canada, and the United States and discovery of new platinum sources, including the Falkland Islands, off the southern tip of South America.

As for retailers, if 2004 holiday sales results are an indicator, dealers in platinum jewelry and watches can look forward to a year of healthy business.

Despite the overall 5 percent drop in demand for platinum jewelry in North America last year, sales in the high end of the market remained relatively strong—enough for a number of luxury brands to launch new products—through the end of the year, auguring continued good sales in 2005, say both Johnson Matthey and the Platinum Guild International-USA, the U.S. marketing arm for the worldwide platinum industry. Indeed, while mass retailers endured ho-hum sales and post-holiday price slashing, and Middle America's spending remained cautious at year's end, affluent consumers continued to purchase high-end merchandise, PGI says.

'Spending Divide.' That's one more indication of what a January 2005 PGI report calls the "spending divide," or "retail rift," between dealers in luxury-price products like platinum jewelry and watches and those catering to the wider public. Its report notes, for example, that while mass retail sales rose just 2.7 percent in December (less than the 3 percent to 3.5 percent forecast by the International Council of Shopping Centers in a survey of 77 nationwide retail chains), the Los Angeles Times in early January reported that stores selling luxury goods gained 10.3 percent as a group. At Lux, Bond & Green jewelers in New England, for example, Christmas 2004 wasn't about big sales, but about quality—quality diamonds and platinum settings for classical designs in all categories, said president John A. Green. "Platinum again led all categories for us from bridal to fashion jewelry," he said.

A healthy U.S. luxury market should continue in 2005, retail analyst Howard Davidowitz told the San Jose Mercury News in January. The stock market is recovering, tax breaks benefit the wealthy, and America had 30 percent more millionaires in 2004 than it did in 2003, he told the paper. All affect sales at upscale shops.

With market trends indicating affluent consumers will continue to spend at the highest end of the luxury food chain, PGI's report says now is the best time for selling platinum. The organization advocates a strong platinum inventory as a way to compete in a marketplace that includes online retailers and squeezed diamond margins. Bridal and three-stone anniversary rings and jewelry are the items expected to show the greatest strength in 2005, says Huw Daniel, president of PGI-USA.

Sales Support. Johnson Matthey is making it easier for manufacturers to buy platinum by offering hedging plans that let them lock into a platinum price for a period of time. PGI-USA in the past year launched its Platinum Experience tour (a comprehensive sales, management, and technical-training seminar to turn consumer interest in platinum into sales); its DVD training program for retailers (providing platinum education and sales skills); and its "Online Catalog and Marketing Tool Kit" (essentially replacing its print catalog with a more cost-effective tool for retailers, manufacturers, and designers to promote and advertise their platinum jewelry).

Also supporting these efforts is the continuing popularity of platinum jewelry with style setters and celebrities, who keep the metal in the public spotlight and the news. Earlier this year, for example, Academy Award winner Jamie Foxx wore a platinum Chris Aire watch to the Golden Globes, Screen Actors Guild, and Oscars awards events; Prince Charles of England and real-estate tycoon Donald Trump each gave platinum diamond rings to their brides; and actresses Kate Winslet, Jennifer Garner, Joely Richardson, and Ashley Judd all adorned themselves at various red-carpet events with such trendy platinum jewelry as long drop earrings, vintage brooches, and right-hand rings with gems or diamonds. "It is becoming increasingly evident that platinum jewelry is an important part of the red-carpet trends," says Michael O'Connor, PGI-USA senior vice president of communications and trade relations.

PGI augments that by offering various promotional opportunities to platinum jewelry designers and manufacturers, such as one-stop-shopping suites for celebrity stylists at top-rate Hollywood awards shows. There, celebrities (or their stylists) see a broad selection of designers and pieces and work with a representative to build a "platinum look" for their personality and dress.

"Not only are these events a wonderful resource for celebrities and stylists, they provide great support and tremendous exposure for many of our industry partners," says O'Connor. The suites also attract various print and broadcast media looking to preview trends on the red carpet.

But platinum's popularity isn't limited to the awards circuit. Designers such as Calvin Stewart, whose luxury-price A.P.O. Jeans feature platinum buttons and rivets, keep finding novel ways to use it. Nor is platinum restricted to the affluent. "More popular-priced brands are wisely utilizing platinum's inherent qualities to create aspiration, while targeting younger consumers who've grown up knowing that platinum records, 'platinum' credit cards, and platinum jewelry are items to be aspired to," says PGI's O'Connor. "Blue Nile, for example, offers youthful-style platinum bracelets and watches and other items at extremely attractive pricing. It's a wise move that works well with younger and aspirational consumers."