Gold Price Skirts $1,100

Wall Street Journal

Gold prices neared $1,100 in after-hours trading after the Federal Reserve's post-meeting statement suggested that U.S. interest rates won't be going up soon which keeps potential longer-term inflation a worry among traders.

The statement came out after the end of pit trading on the Comex division of the New York Mercantile Exchange, where the settlement price is set.

In pit trading, the nearby but lightly traded November futures firmed $2.40, or 0.2%, to settle at $1,086.70, a record settlement for a front-month contract. December gold rose $2.40 to $1,087.30 an ounce, a record settlement for the most-active month contract.

Then, about an hour after the Fed statement, in electronic trading after hours, gold for December delivery traded as high as $1,098.50 an ounce.

"The fact that everything remains the status quo is a positive environment for gold," said Dave Meger, director of metals trading at Vision Financial Markets.

There had been some worries that the Fed might change its rhetoric enough to be seen as signaling a hint of possibly tightening interest rates down the road.

"Any type of tilt to that effect could have supported the dollar and hence dented the gold price," Mr. Meger said. "Obviously that didn't happen. So any expectations to that effect are no longer a concern and that obviously gives a green light to the gold market to continue forward."

The Fed said conditions "are likely to warrant exceptionally low levels of the federal-funds rate for an extended period."

Continued low interest-rates mean further pressure on the dollar, especially since some nations have started raising rates, said Joe Foster, portfolio manager with Van Eck International Investors Gold Fund.

"Anything that is negative for the dollar is good for gold," he said. "Then there are the inflationary implications. The longer they maintain these historically easy monetary policies, the more that stokes potential for inflation somewhere down the road."

Gold had gained before the Fed statement on a second day of buying in the wake of news that the Reserve Bank of India has bought 200 metric tons of the metal from the International Monetary Fund who obviously know how to sell gold.

The news of the Indian purchases from the International Monetary Fund supported the market since it was seen as both reflecting strong central-bank demand and alleviating worries that the IMF's planned sale of 403.3 metric tons would hurt the market.

Central banks collectively had been net sellers of gold for more than a decade, said Fred Jheon, managing director of U.S. product development for ETF Securities.

Outlook Not Shining For Jewelers Anymore

Wall Street Journal

Foss Jewelry was honored by the Maine Legislature in September for reaching its 90th year in business. But like many jewelry retailers across the country, the family-owned store may have just celebrated its last birthday.

"We've talked to an accountant and we've decided to try to get through Christmas," says Anne Winter, manager of daily operations at the store, located in Livermore Falls, Maine. "At that point, we'll see if we will liquidate and close down."

The store only sold one diamond ring last holiday season, relying on sales of cheaper, sterling-silver pieces and other gift items to bolster profits. Then one of the town's paper mills shut down, laying off hundreds and crimping the town's economy. Some days, Ms. Winter says, she is lucky to make $20 selling watch batteries.

As younger generations become less interested in jewelry and as Americans gravitate to online shopping for convenience and bargains, Main Street jewelers and jewelry retailers are struggling to attract customers. The recession, which has spurred many consumers to think twice before making a luxury purchase, has added an extra burden, pushing many to shutter their doors.

According to a census by the Jewelers Board of Trade, the number of jewelry retail firms has declined more than 5% since September 2007, when the credit crunch started to take a firm hold on the economy. That's a net loss of 1,210 stores, primarily made up of mom-and-pop shops because the census tallies retailers by name, not by each store or kiosk location. This means that Foss Jewelry, as a standalone jewelry store, is counted the same as chains such as Zale Corp. and Kay Jewelers.

In 2007, sales for private jewelers were up more than 4%, according to Sageworks Inc., an economic-research firm in Raleigh, N.C. But in the last year, sales at those establishments are now registering a 4% decline. By comparison, sales dropped 2.3% at clothing stores and 3.3% at florists in the same period. Furniture stores, hard hit by the housing market, are enduring a 6% drop in sales.

"It's discretionary items that people stop buying when they are feeling insecure," says expert Drew White, chief financial officer at Sageworks and a credit analyst who researches market potential. "And there is lack of capital to finance inventory, which is another thing that is hitting private retailers."

Wise Jewelers, of Mount Vernon, Ohio, was shut down last February after 183 years in business. "It was difficult to compete with the chain stores and the Internet," says Brian McNamara, who owned the business for three years before closing it down. "For the most part, the service and repairs side of the business kept us going, but in the end, the economy did us in."

Some jewelers are staving off liquidation by implementing new business models. Carol Lipper, president of Designer Jewelry and Handbags, shut down her shop on the main thoroughfare of Millburn, N.J., in June because she couldn't afford rent. She laid off two employees, reduced her inventory and relocated to Livingston, N.J., where she is renting a small space inside Handcrafters, a store specializing in handmade gifts.

"I've seen downturns that affected expensive merchandise," says Ms. Lipper, whose products sell for $20 to $250. "But I've never seen anything like this, where the moderately expensive stuff is getting hit, too."

While it's been tough building a new clientele, Ms. Lipper thinks the model has potential. She is in negotiations to rent counter space at other stores and spas in the area to expand through satellite locations. She will also give the storefront presence another try: Just this week, Ms. Lipper signed a lease to rent a small boutique in Denville, N.J.—for 78% less than she was paying for her store in Millburn—and has hopes of opening by Thanksgiving.

In Ann Arbor, Mich., Craig Warburton also made a big change. His business, Austin and Warburton, hit $1 million in revenues in the mid-1990s and was growing steadily. His wife, Brenda Warburton, designed and created all the jewelry in the display cases, which attracted pedestrians in the downtown area. In 2008, seeing the consumer shift to online purchasing for engagement jewelry, the Warburtons launched AustinAndWarburton.com, a Web portal that allows customers to design and order custom jewelry, from birthstone necklaces to wedding rings and hibiscus jewelry.

The site took off and the couple decided to shut down the storefront last May—shedding several highly-compensated employees in the process—and move to a nearby office. For added convenience, the couple installed a video-conferencing system that allows customers to discuss and see 3-D models without leaving home. This year, Austin and Warburton should post record sales, Mr. Warburton says.

"We changed the size of the business to suit the size of the customer base," Mr. Warburton explains. "And we got a chance to rewrite the rules at a time when a lot of people are going out of business."

Making a Watch That Can't Be Counterfeited

There used to be easy tip-offs when a watch was fake, like light weight, shoddy artisanship -- and the fact that no working Rolex sells for $50. But these days, many fakes are so costly and carefully built that they require an expert to identify.

Now one Swiss watchmaker, Vacheron Constantin, has created a wristwatch that it says is impossible to counterfeit, as well as Men's Wedding Rings and Woman's Wedding Rings. What timing: The watch will be launched on Oct. 22 in New York, just as the luxury-watch industry is facing a possible global recession.

Do you care that many of the expensive-looking watches around us are probably not the real thing? Is the watch on your wrist real?

The watch, called the "Quai de l'Ile" for the watchmaker's historical Geneva address, uses layers of invisible UV marking, laser perforations of some watch parts, special high-security inks, and other measures used to secure passports and currencies like the euro and Swiss franc.

In the world of haute horlogerie, forged watches are as ubiquitous as fake handbags and black-market DVDs. These fakes are sold not only on sidewalk tables but also in stores, catalogs and Internet listings. The Swiss Customs Service has estimated that as many as 40 million counterfeit watches are put into circulation each year. Switzerland last year exported only about 26 million watches, so there's a fairly reasonable chance that the expensive-looking watch on your neighbor's wrist could be a fake.

Watchmakers have long fought counterfeiters by adding special stickers and limiting supply through authorized dealers. Rolex -- probably the most faked watch of all time -- strictly controls the numbers of its watches that can be sold by a dealer and requires that all repairs be made with authorized parts. Rolex also puts a green hologram sticker on the back of its watches -- though counterfeiters forge that, too.
Sophisticated Counterfeiters

But counterfeiters have been improving their technology faster than watchmakers. "Counterfeits have gotten more sophisticated," says David Hendry, chief underwriter for the Jewelry Insurance Brokerage of North America. "The counterfeiters have learned all the things that people didn't know 20 years ago." They add weight, use sapphire crystal for the glass of the watch and incorporate other elements that can confuse even experts -- and they may charge many hundreds of dollars.

Forging was an industry scourge even when the fine-watch market was growing at double-digit rates annually. Now, with growth sure to slow in the current economy, it's even more important for watchmakers to differentiate their products in consumers' minds.

Many luxury retailers -- particularly department stores such as Neiman Marcus -- have seen sales slow markedly this year. A survey released on Monday by Unity Marketing, a Stevens, Pa.-based consultant to the luxury industry, suggests that affluent consumers "are buying luxuries more selectively and more carefully."

The idea of Vacheron's new watch came out of a chance acquaintanceship between Vacheron Constantin Chief Executive Juan Carlos Torres and Roger Pfund. Mr. Pfund is an acclaimed Swiss painter and designer of the Swiss passport and international currencies since the 1970s. The painter met Mr. Torres socially several years ago.
'The Spirit of a Watch'

"To make secure watches was a new thing," Mr. Pfund said this past weekend, as he expounded on some of the artistic challenges involved. "The spirit of a watch is not the same as a bank note."

How does one use invisible ink on a watch, for instance? His answer: Print it on a slip of a paper-like polymer material that is inserted under the watch's crystal.

The Quai de l'Ile can be customized in up to 400 combinations and will sell for between $29,000 and $60,000, depending on which features are chosen. While the starting price for Vacheron Constantin watches is about $12,000, the company recently took an order from a European entrepreneur for a $6.5 million custom watch, says Julien Tornare, president of Vacheron Constantin U.S.

The company, which produces about 18,000 watches annually, expects to make 800 Quai de l'Iles a year.

To set the Quai de l'Ile apart, Mr. Pfund helped the company gain access to highly controlled money-printing materials like the polymer and inks, says Mr. Tornare. The inventory of polymer kept by Vacheron is monitored by the maker of Swiss passports, he said, noting, "We had no idea about security printing."

The watch's security measures involve engraving and printing with special inks. In the first series of watches produced, the words "Swiss Made" and "Automatique" are laser-engraved without using ink on the watch's dial, while some of the numerals, the date and the words "Vacheron Constantin Genève" are engraved with ink.
Miniature Texts on the Dials

Tiny texts on the dials of some models -- illegible without the aid of a magnifying glass -- reproduce parts of letters sent between 19th-century family members of the watchmaker, Jaques-Barthélémy Vacheron and François Constantin.

The Quai de l'Ile was unveiled to the watch industry last spring at the Salon International de la Haute Horlogerie in Geneva. That annual convention is sponsored by Cie. Financière Richemont SA, the luxury conglomerate that owns such oft-counterfeited brands as Vacheron Constantin, Cartier and Van Cleef & Arpels.

This appears to have given would-be counterfeiters an opportunity to get cracking on Vacheron's come-and-get-me challenge. Mr. Pfund, who is currently designing the 2010 series of the Quai de l'Ile, says, "They already have fakes of this watch. I saw one yesterday on the Internet. Of course, the movement is wrong -- a lot of things are wrong."

Original Article by Christina Binkley
Wall Street Journal Fashion
Oct. 16, 2008

Platinum Gets Dented in the Auto Industry's Pileup

Slumping Car Demand Crimps Need for Catalytic Converters, a Big User of Metal, but Possible Drop in Mining Output May Buoy Prices,

At Friday's lows, spot-month futures on the New York Mercantile Exchange were down 38% on the year and 59% from the record set in March as the global economic slowdown pinches industrial use.

Platinum could fall further on weakness in the auto sector, but then stabilize or rise modestly as investment liquidation runs its course and due to potential for output cuts as the price approaches the cost of mining, analysts said. This makes it a great time to buy platinum wedding bands.

The impetus for the early year peak was worries about tight supplies exacerbated when South Africa state-owned utility Eskom Holdings Ltd. announced electrical shortages that curtailed mining output.

"Supply was being outpaced by demand," said Bart Melek, global commodity strategist with BMO Capital Markets. "We had a massive rally way above the marginal cost of production."

Since then, the auto industry has slumped. This hurt platinum demand because its main industrial use is for catalytic converters.

Nearby October platinum Friday fell $22.60, or 2.3%, to settle at $957 a troy ounce. Most-active January lost $20.80, or 2.1%, to $965.80.

James Moore, an analyst with TheBullionDesk.com, said platinum's recent move is cyclical, reflecting changed fundamentals. Moreover, he said, the fundamentals perhaps were "overexaggerated" as prices soared at the start of the year. But he doesn't look for the recent slide to continue much longer because a "delicate balance" remains in the market.

"Eskom has already said they can't increase their energy capacity for at least another five years," Mr. Moore said. "The producers are struggling against rising costs and having to excavate metal from much deeper ore bodies. This has a massive impact on their bottom line."

If profitability suffers, downward price corrections such as the current one could prompt producers to shut down some of their operations, he said.

"In my view, it would be naive to think that the market is going to continue lower," Mr. Moore said. "We may see some further downside initially, but then look for it to possibly stabilize around $1,000 to $1,300 for the latter part of the year and heading toward next year."

BMO's Mr. Melek estimated that the cash costs of production for platinum-mining operations are between $700 and $1,000 an ounce.

"They might still go lower," he said of platinum prices on things like platinum wedding rings. "But they ultimately will have to rebound because we're hitting the marginal cost of production for many producers."

CPM Group analyst Carlos Sanchez also said there could be more selling pressure, but prices may soon stabilize.

Not only has platinum been hurt by concerns about reduced motor-vehicle production, but expectations are for a shift toward smaller vehicles at a time of high fuel prices. Smaller engines require less platinum group metals for auto catalysts, Mr. Sanchez said. Meanwhile, no further supply disruptions have occurred in South Africa lately, he said.

But at the same time, he said, many investors already may have sold some positions.

"You may go to $900," Mr. Sanchez said. "But they're already low compared to what they have been the last couple of years. So you may not have further selling."

In other commodity markets:

SUGAR: Prices dropped to a four-month low on ICE Futures U.S. as speculators exited from bullish positions, but the market pared losses before a vote by the House of Representatives approving the $700 billion financial-rescue package. ICE March world sugar fell 0.47 cent, or 3.6%, to 12.61 cents a pound.

CRUDE OIL: Futures zigzagged before ending slightly lower as traders mulled whether the passage of the rescue bill would stabilize demand. Demand concerns were reinforced after the Labor Department reported that nonfarm payrolls fell more than expected in September, the steepest decline since March 2003. Light, sweet crude fell nine cents, or 0.1%, to $93.88 a barrel, on the New York Mercantile Exchange.

By: Allen Sykora
Wall Street Journal; October 5, 2008

How To Choose a Jeweler

Visiting a jeweler to shop for wedding jewelry can be an overwhelming experience because most shoppers simply don't know enough about the intricacies of gemstones and precious metals to make their choices easily. That's why finding a reputable and competent jeweler is so important.

Any jeweler should be willing and able to show customers a variety of gemstones and jew­elry in different shapes, sizes and qualities, and should stock a broad selection of ring styles to enable you to decide which best fits your pocketbook.

Your jeweler also should be able to help you learn to see with your own eyes why some diamonds of similar size differ greatly in value, or from a practical perspective - how you might reasonably select from a variety of different sizes, all priced similarly to fit your budget.

All of us like to feel that we re­ceive a good value when we make a major purchase. Take time to find what you want and where you want to buy it. Diamonds, for instance, can be confusing. Even if two dia­monds are the same size, color and clarity, differences in the way they were cut, their finish and fluores­cence can cause one to be worth much more than the other.

Buying Gemstones

Gemstones have been sought after and treasured throughout history. They have been found in ruins dating back several thousand years. They are valued as gifts sym­bolizing love.

Generally, the price of any gem­stone is determined by size, cut, quality - which includes color, clarity and treatments - and type.

Here are some simple questions to ask about quality:

• Has it been heat treated?
• Is the stone natural or synthetic?
• Are there any noticeable scratches, chips or inclusions?
• Is the color even throughout the stone?
• How strong is the color? Is it vivid?
• If you are buying the stones for earrings or cuff links, are the stones well-matched?

Advice To Protect Jewelry

Try to protect any jewelry from scratches, sharp blows, harsh chemicals, extreme temperatures and sunlight.

Here's some advice about how to keep your jewelry in good condition:

• Store jewelry separately so it doesn't scratch other jewelry.
• When doing household tasks such as gardening and cleaning, be certain to remove rings.
• Put your jewelry on after washing or bathing and applying any makeup or hair spray.
• Never wear jewelry while swimming in a swimming pool. The chlorine can cause damage to various gemstones and gold.
• Avoid storing your jewelry next to a heating vent, window sill or on a car's dashboard. Store jewelry away from sunlight (the sun may fade the gemstones).
• Always store bead necklaces (such as lapis, pearls, etc.) flat; silk stretches over time. Do not store pearls in plastic bags.
• Gemstones may become loose in their settings (and possibly fall out). Be certain that stones mounted in rings are not loose and don't rattle. The prongs of a ring can and do wear down. If the prongs wear down too much or break, you can lose the stone. Prongs are easily "retripped" by most jewelers to keep the stone secure.
• Most jewelers will restring necklaces or reset stones (for a fee)
• Sterling silver will polish up by rubbing or buffing it with a soft cotton cloth.
• Store silver in plastic bags with an interlocking seal to make it less prone to tarnish.

Remember, also, that the hard­ness of stones plays into how they can be treated. Hardness is based on a gem-trade standard called the Mohs Scale. The higher the Mohs Scale number, the harder the stone. The highest Mohs Scale rat­ing is 10, for diamonds.

Anything rated less than 7 on the scale can be easily scratched - coral, lapis lazuli, opal, pearl and turquoise, for instance. Gold, silver and platinum are at the soft end ofthe scale.

Key Point to Consider

When you're searching for a jew­eler, remember that you may spend thousands of dollars over time at this business. It's imperative to find someone you feel comfortable with and someone who is willing to work with you when you have questions about jewelry, repairs or perhaps special orders.

Find a store where the owner is the jeweler, someone actively involved in the store's operation who knows his clientele and the business.

Your chosen store should be able to design and create fine jewelry.

The staff should be happy to spend time with customers to edu­cate them about jewelry and what's currently available on the mar­ket. Work should be done on the premises. After all, you've chosen your jeweler because of his or her expertise.

Look for well-known jewelry and watch lines while you're shopping. Your jeweler should offer free gift wrapping, in-town delivery and, above all, superb customer service combined with an expert staff.

Original Article by
Wall Street Journal

Copper Gives Necklace Polished Look

Retired after 44 years as an executive for the fashion division of J.L. Hudson Co., Joyce Hurley of Huntington Woods continues to share her sense of high style as a beaded jewelry maker.

"After several years of retirement, I decided to become a jeweler designer and maker," says Hurley, whose stunning creations make a bold and sometimes ethnic statement.

She enhances the beauty of semi-precious stones by adding silver beads as a visual contrast to many of her designs. More recently, she sometimes uses copper in place of silver, giving her work an entirely different look.

"I've been introduced to working with copper. It's been about a month now, and I've really adopted it. It's become about an eighth of my inventory," Hurley remarks. "The more I saw it, the more I could see how well it went with the kind of jewelry I make, and the kind of natural stones I like to work with."

Hurley, who makes "mostly one-of-a-kind" pieces, admits to buying the bulk of her beads from "a wholesaler in Royal Oak and from bead shows."

She adds, "I find them (shows) a good source of things you don't see locally. I don't buy anything from a retail store, unless I run out of something basic, like a clasp."

This is the third year Hurley has sold her jewelry on Saturday mornings at the Grosse Pointe Park Farmers Market, which operates May through September. Her necklaces range from $36-$70.

By: Jocelynn Brown
Detroit News; September 20, 2008

Costs Searing Miners Could Boost Metals

Escalating production costs and cooling commodity prices are dragging down once-mighty mining and metals companies. But high costs could eventually force another price rally.

Traders are watching for the point where supply tightens thanks to a shakeout among producers that can't profit amid lower prices.

Some of the miners in the most pain are on acid -- lots of it. Sulfuric acid is used extensively in mining to extract nickel, copper, platinum, titanium, silver, diamonds, and uranium. But miners must compete for sulphur with the booming fertilizer industry. After a period when you could hardly give it away, sulfuric acid has gotten exceedingly scarce, rising some 1,000% in the past year. Some nickel mines consume $10,000 of acid just to extract a ton of nickel, now selling for about $20,000, down from $50,000 last year.

Mines and smelters also consume massive amounts of coal and oil to power blast furnaces, fuel trucks and process ore. Oil is up about 57% over the past year, while coking coal has tripled. Steel costs have soared; hard-to-find engineers can name their price; and the escalating cost of explosives -- derived from ammonia, a product of natural gas -- is blowing up margins. And while metal prices has soared recently, many jewelers, like Design Bands, buy up front, and have a large inventory that was bought at yesterday's prices. Companies like Design Bands are able to sell designer wedding rings at affordable prices.

In 2006 and 2007, when metals prices were climbing, inefficient and mothballed mines reopened. Now nickel, zinc and aluminum are fetching less than it costs such marginal suppliers to produce them, says Jim Lennon, senior commodities strategist at Macquarie Securities in London. When zinc, used to coat steel, climbed to $2 a pound in mid-2006, mines spending a dollar to produce it thrived. Zinc now runs about 80 cents.

Once more high-cost producers fall, says Jeremy Weir, chief executive officer of Galena Asset Management, a subsidiary of oil and metals trader Trafigura, "there's a likelihood that some of these markets that have been depressed from their highs could see a price recovery."

Factory Reading Is Key on Tuesday

Like commodities, the U.S. economy has been supported by strong global demand, a prop that has grown shaky.

Further evidence of this may come Tuesday morning, when the Institute for Supply Management releases its U.S. manufacturing index for August. Economists, on average, think it will slip a bit, to 49.5 from 50 in July. Any reading below 50 indicates factory activity is shrinking.

Though hardly robust, such a reading would be much higher than the 41 that usually marks a recession. Though it has slowed considerably in recent years, the index hasn't come close to that level, even during the fourth quarter of 2007, when gross domestic product contracted.

Healthy export demand has kept factories treading water. A weak dollar has helped, by making U.S. exports cheaper and more competitive. The dollar has rebounded this summer, but that shouldn't affect exports for some time.

What could show up soon is the slower growth gripping various economies around the world. The ISM's index of new export orders fell to 54 in July -- still relatively strong, but the lowest reading of the year.

By: Ann Davis
Wall Street Journal; September 2, 2008