Hot and Gold

Building on strong holiday buzz and a successful VicenzaOro fair in January, gold seems poised to maintain or even exceed expectations in 2005. As retailers continue to see strong sales of fashion gold, the World Gold Council is keeping up its end of the bargain by putting itself in the consumer spotlight with an aggressive spring advertising schedule and high-profile initiatives. Is the look of gold merely trendy now, or is this success actually a game of simple economics?

According to John Calnon, managing director, World Gold Council of the Americas, this growth at retail may partly be a reaction to difficult economic times. “Historically, gold is rising and rising slowly,” Calnon explains. “There has been a great deal written about the high gold prices in the consumer media, and it actually promotes the intrinsic value of gold.”

WGC’s theory is this: The more consumers hear about the rise in gold price, the more they realize gold jewelry is a good investment. Calnon maintains that retailers would rather sell in a rising gold market than a falling one, because, again, they can attest to gold’s value when their customers make purchases.

According to industry analyst Ken Gassman, the theory sounds good but may be slightly misleading. “I think that the World Gold Council has come up with a great angle by promoting the intrinsic value of gold at this time,” Gassman says. “But you’re fooling yourself if you’re buying gold jewelry for investment purposes. Unless you’re buying gold bullion, there’s no reason to keep that gold in a safe for later.”

Gassman explains that there are several things going on in the market right now. First, when the dollar weakens, consumers flee. They move into gold, and that in turn moves the gold price up. But, while we track the gold price in dollars, and have seen a steady rise, the price has remained relatively flat in euros. “All metal prices are up right now,” Gassman says, “and there’s no reason to think that’s going to change anytime soon. The bottom line is this: If you’re buying a piece of jewelry that is under $500, the price of the labor is probably worth more than the gold itself.”

WGC’s “angle” may be a positive way to look at a difficult situation, but it is not spin. Gold historically has been accepted as the universal currency and, according to Gassman, will remain a solid investment.

WGC Initiatives. WGC is ramping up its spring 2005 initiatives to ensure rising prices don’t overshadow gold’s success at retail or its current hold on fashion trends.

“The buzz for yellow gold is out there,” Calnon says. “We’re seeing a lot of yellow gold at the major award shows, and the runways have shown gold for two years now. These factors don’t always mean a trickle down to the general consumer, but we are seeing it happen now.”

Calnon says that no one can put their finger on one thing that is driving demand, but he knows that WGC is seeing a tremendous response from consumer editors, including more requests for yellow-gold product. In addition, while in other years WGC has been tremendously visible for fall, this year will see 48 pages of consumer advertising in the spring for the Speak Gold campaign.

Amanda Gizzi, media liaison for the Jewelry Information Center, is also noting strong interest in yellow gold from consumer editors. “We are seeing a lot more of yellow gold from many standpoints,” Gizzi says. “Not only are we getting a lot more requests from editors but also designers are saying that they are homing in on and creating more yellow-gold pieces for their collections. Designers are saying that customers are feeling drawn to the yellow look right now.”

Some of this demand is likely being driven by Gold Expressions, the product-development program created by WGC in partnership with the Vicenza Fair. Now in its second year, the program, which was created to reinvigorate exports of Italian gold jewelry and revive the desirability of gold jewelry worldwide, is starting to realize success.

“We’ve had incredible response to our U.S. launch in December and at Vicenza in January,” Calnon says. “It really started to come to life, and both retailers and editors are responding to the collection.” Comprising 430 fashion-forward pieces, the collection was intended to be commercial and affordable, something the market needed. “We have found through consumer research that customers would buy more gold jewelry if there were more pieces that they liked, so right now our main goal is giving the consumer what she is looking for in terms of fashion and product,” he says.

WGC is also promoting May is Gold Month for the second year in a row. Partnering with high-profile retailers and vendors, WGC will provide point-of-purchase materials as well as in-store displays to get customers excited about making a gold purchase. (See May Is Gold Month sidebar, p. 104.)

Retailer Response. According to retailers, WGC is on the right track. Calnon says retailers are selling much more fashion product than the more basic pieces yellow gold used to be associated with. In addition, designers have used Gold Expressions as a chance to show innovation and design in a commercial way, Calnon explains. “The Italian designers are doing business through this program and that’s what really counts.”

Terry Burman, chief executive officer of Sterling Jewelers, has seen growth in the fashion gold category, saying, “This Christmas [2004] we had particular success in the mall stores with fashion gold jewelry … a campaign that was supported by a collaborative effort with the World Gold Council.”

At New Jersey–based Hamilton Jewelers, marketing coordinator Jennifer Rouse says yellow gold is coming back. “We’re doing a stronger push for spring 2005. Drop earrings, such as stiletto or shoulder-duster styles, are strong in all gold or in gold with gemstones. Our strong shapes are geometric,” she says. Rouse notes that female self-purchasing is up as women look for great everyday wardrobe essentials like bangles and hoop earrings. Hamilton’s strong gold designers are Marco Bicego, John Hardy, Stephen Dweck, and Roberto Coin.

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