The New Gold Rush

RAPAPORT… Nostalgia is all well and good, but there comes a point when
temptation overrides sentiment. Apparently, that point was reached for jewelry
owners when gold topped $1,000 an ounce for the first time in March of 2008.
“That was a big psychological moment,” says Matthew Rosenheim of Tiny Jewel Box
in Washington, D.C. “It got people off the couch.” Once off the couch, they
headed for their jewelry boxes, looking for things to sell. 

“First, it was jewelry they never wore,” Rosenheim
explained. “Then, it was sentimental; now, it’s things that they wear
occasionally but not often enough to justify holding onto — not when gold is
over $1,800 an ounce.”

The precious metal had been on an upward trend since 2006,
when it passed the $500 mark after holding steady between $300 and $400 for
more than five years. But once the price began to move up, in a reverse mirror
image of the economy’s downward movement, the pace of change accelerated. And
as the increase in dollar value speeded up, so did the amount of jewelry coming
back to retail jewelers for its gold value.

Michael Toback of the 47th Street firm, Myron Toback, says the
increase in people selling jewelry started in 2008, “when gold started to make
a run up to $600 to $700.  Those
were the new highs at the time; people started to look and evaluate. When it
got to $800 — another level up — it started another wave of selling. When it
cracked $1,000, every time it hit a benchmark, there was a new wave.” Over the
past three months, he says, the increase in interest has slowed down but the
volume of goods being sold is still higher than before 2008. 

Toback buys jewelry coming to him directly from his
customers, as well as from retailers who are amassing gold brought in by their
own customers and by people off the street.

Based on its performance in recent months, the increase in
the gold price since 2008 has seemed meteoric, but from the time it reached
$1,000 until the next benchmark of $1,100, a full year passed. Each successive
$100 per ounce increment came faster and faster, as seen in the chart on page
129.

For Toback, there has been a 50 percent to 75 percent
increase in the volume of gold jewelry he is purchasing over the past three to
four years. “At first, it was broken pieces, unworn jewelry. But at $1,900,
everyone is going back to their jewelry boxes. Now it’s, ‘I only wear this once
or twice a year, now I’m going to melt it.’”

It’s not just old, undistinguished jewelry and broken
chains, Toback says. “We still see pieces that have nice antique value.” He
offers customers selling these pieces a choice. He suggests they try to sell
the piece online, or consign it for sale. “Some people say, ‘I don’t want to
waste my time.’ They would rather sell it on the spot, even if they get $1,000
less.”

For dealers such as Toback, there is a considerable amount
of paperwork and investment involved in the gold buyback. When he buys pieces
with antique value, he offers them to his list of “antique people” — dealers or
people in the trade who might be interested — before he commits them to be
melted. “I give everyone an opportunity to look but I don’t hold it forever;
time is money.” 

Regulations

As a dealer with a secondhand license to buy, Toback is
required by New York law to keep a list of every purchase, with the name of the
seller. “Police from the local precinct, Midtown North, check my book every six
to eight weeks, to see who I bought from.” Ironically, although licensed
dealers are routinely inspected, the goods they take in are likely to have been
acquired legally. It’s the unlicensed buyers — fences, in fact — who are more
likely to be dealing in stolen goods. But as Toback says, “The police don’t
know where to find them.” And, of course, they don’t keep records of their
transactions.

In Washington D.C., Rosenheim says, “As licensed secondhand
dealers, we have to take two forms of ID. Then we have to file a report with
the pawnbroker’s office” within the D.C. Department of Consumer and Regulatory
Affairs “and hold the goods for 30 days.” Although having to hold these goods
creates a big financial risk, especially during such turbulence in the gold
market, Rosenheim sees it as just part of the inherent risks of doing
business. 

While the intention is to control the movement of stolen
merchandise, the D.C. police department does not have a clearinghouse of
information about losses and purchases. People who have suffered a loss must
follow up on their own. “They are motivated to shop the marketplace,” says
Rosenheim. “There are times when an individual will contact our business; they
will send in pictures of jewelry they’ve lost.” He will hold something for 30
days; after that, if it has no antique or vintage value, he bundles it up and
ships it off to the refiner.

The same scenario is being enacted in the elegant environs
of Greenwich, Connecticut, where Simon Teakle, antique expert at
Betteridge  — and former head of
the jewelry department at Christie’s New York — says, “We are seeing a
tremendous increase in people wanting to sell gold and jewelry. It’s a broad
range of items. We still get gold jewelry that goes straight to the refiner,
but we also get lovely pieces of Cartier jewelry. We take each item on its own
merits. If it’s very unusual, we pay a premium for that.” 

At some point, the value of the design and the value of the
gold content begin to merge. “You might get more general, brand-name items
where you want to save them but gold is going up so much, that gap is
narrowing,” says Teakle. Many pieces are taken in and resold in the store. As
an example, he says, “Whenever we buy one of the ‘Love’ bracelets — the Aldo
Cipullo design for Cartier — it goes right out the door. It’s iconic.”

But there is a great deal of signed jewelry from the major
houses, made in the 1960s and ’70s, that Teakle says, discreetly, “wasn’t as
great as some of their earlier pieces. People are bringing in more of this. We
send it to a refiner in New York. We are sending down a big bundle every week.”
If there was any stigma attached to selling jewelry, it is long gone. “Even in
Greenwich,” he adds, “people will camp out at the Hyatt Hotel with signs that
say, ‘I buy gold.’”

For those who crave a discreet place to sell, there’s the
elegant upstairs shop of Camilla Dietz Bergeron on Madison Avenue in New York
City. Known for fine, antique and period jewelry, she’s seen it all and she
buys it all, but she doesn’t keep much of it around very long. “We have people
wanting to sell ugly jewelry. We buy it on the price of gold. We have been
doing that since gold was $300. 
It’s not jewelry that we would put out on the table for our clients.”
For resale, she says, “We buy on the name and the look. We buy something almost
every single day. We just bought a fabulous necklace — Van Cleef & Arpels;
it was worth way more than the gold.”

New Value

There is another aspect to the soaring price of gold: the
value of pieces people want to keep. For Nancy Bloom, president of
Reinstein/Ross in New York City, the emphasis is on helping people keep their
appraisals up to date.

Reinstein/Ross specializes in high-karat gold, with fine,
fancy colored sapphires and other gems. Customers with old pieces are aware
that the gold value of these jewels is considerably out of date, especially for
pieces that were bought more than ten years ago. “No one is coming back to melt
our jewelry,” Bloom says. “With many of the designs, we have to evaluate not
only the metal but also the stones because those prices have increased so much,
too.”

Ironically, Bloom says, “We have had some really strong
sales. People are aware of the value of the gold. It’s in the news all the
time. There is a perceived value component.” When customers do bring in old
settings that they have inherited, with beautiful old stones they want to have
reset, Bloom sends the setting to the refiner and applies the value of the gold
to the price of the new piece.

Rosenheim echoes that sales approach. “I am seeing people coming
into the store and they might be shopping for new things. They put their old
jewelry toward a new purchase. We will offer a cash price or a higher store
credit — that often turns into a new sale.”

Gold is the ultimate recyclable. It can be turned into new
jewelry — and it can be turned into money. That’s truly the Midas touch.