Gold and silver prices bring new rush

With prices of gold and silver near highs not seen since the early 1980s, jewelry stores, pawnshops and other businesses whose fortunes are tied to the precious metals are feeling the effects.

Around the Charlotte region, businesses that buy secondhand gold and silver items say more consumers are digging out old jewelry and coins to sell.

Some businesses that sell precious metal products are passing price increases along to customers, but others are holding off – and feeling pinched – because they need to keep prices competitive.

And some say interest in buying silver and gold as an investment is going up – even though it contradicts the adage of “buy low, sell high.”

Gold closed Wednesday at $597.50 per troy ounce on the New York Mercantile Exchange after surging above $600 to a 25-year-high the day before. Silver closed about $12.64 an ounce Wednesday after topping $13 the day before, a 23-year high.

Prices of commodities including gold and silver have risen because some investors think they will outperform stocks and bonds. Gold is typically viewed as a hedge against inflation and a declining stock market; its value often goes up in times of uncertainty. Demand from China and India has also been a factor in gold’s recent rise. Gold also bears the distinction of being the only major commodity that is produced primarily for the purpose of owning and admiring it, rather than consuming it.

At Perry’s at SouthPark, which buys and sells estate jewelry and other valuables, business from people who want to sell their silver and gold is up nearly 50 percent in the past 30 to 45 days, said owner Ernest Perry.

“It kind of gets people thinking about all their secondhand stuff when prices go up,” Perry said.

In the last few months, he’s seen more high-end jewelry from brands such as Tiffany and David Yurman – sellers may have had the items appraised previously, but realized they’d get more for them now, he said.

He’s also seen more sellers of silver coins dated before 1964, when they were made of about 90 percent silver. Coins from that era could bring about $7 for each $1 of face value, he said.

But those who peruse the jewelry cases in Perry’s store aren’t yet paying higher prices.

“The higher the gold price goes up, the lower the percentage of profit we make because we have to be competitive,” said Perry. “(But) we make up for it in volume.”

At Hyatt Coin Shop on Wilkinson Boulevard, manager Mitch Hyatt is seeing increases in both buyers who think coins are becoming a better investment, and sellers looking to unload long-held stashes.

“There’s a lot being taken out of safe deposit boxes … and re-entering the market,” he said.

Rising gold prices haven’t slowed the red-hot trend of gold- tooth caps known as grills, popularized by rappers such as Nelly. In Charlotte, Club Faces, a nightclub on Freedom Drive, launched Gold Grills Saturdays about a month ago. Patrons arrive wearing gold and jewel-encrusted bling on their front teeth.

“I just got them this year because they’re such a popular thing,” said Andre Ross, one of the event organizers, who has removable grills that cover 12 teeth.

Merchants who sell grills, such as Carolina Hot Fashions on Nations Ford Road, aren’t yet passing price increases on to consumers because the field is so competitive – grills start at about $150, said owner Mike Ayyad.

But if stores do raise prices, fashion will keep grills popular, said Ross. “They’re going to pay for it regardless,” he said.

At pawnshops, rising prices can benefit both consumers and owners. Pawn customers bring in valuables in exchange for short-term loans, typically 90 days, and can reclaim their items. They’re motivated by an immediate need for cash and don’t typically follow price trends, said Dee Littrell, who heads investor relations for Texas-based Cash America, which has five Charlotte pawnshops.

But in recent months, many customers have been surprised to find their jewelry is worth more than they thought and that they can get higher loans, said Littrell.

The company reaps higher profits on the 30 percent of merchandise that customers don’t reclaim. That’s because rising prices mean it’s worth more at the time of the sale than it was when the customer got a loan several months before, he said.

Cash America, the nation’s largest publicly-traded pawnshop chain, issued an earnings forecast last week saying it will beat first-quarter predictions in part because of rising gold prices.

Over at Replacements Ltd. outside Greensboro, which sells old and new dinnerware and collectibles, fast-rising silver prices enticed the company to cull through its own slow-moving inventory to look for bargains.

Spokesman Michael Lamphier said the company found some older silver patterns that were priced lower than what the piece could fetch as scrap. The company sold several thousand pieces to scrap dealers for roughly $80,000, Lamphier said.

More customers have called asking about silver, and silver sales are up, Lamphier said. “People are seeing silver and silver flatware as a better investment.”

As for the wide range of other consumer products containing silver – including film, mirrors, antibiotic bandages, creams, and even fabric in shoes and athletic clothing, where it has odor-fighting properties – businesses say effects aren’t yet pinching consumers.

In Rock Hill, medical supplier Hartmann-Conco Inc. launched a new surgical dressing this year that contains silver – the metal is known for its antibacterial properties.

The medical supply company locked in its prices for 2006, so officials aren’t worried about increases from manufacturers, and a company official says silver is a small cost in the production.

At Wolf Camera in the Charlotte’s Sycamore Commons Shopping Center, a 7-roll pack of Kodak film still costs $9.99, just as it did before silver’s price run-up. Film is made up of millions of silver salt crystals, or silver halides.

When the store processes a photograph, the silver is stripped from the film. Manager Randy Franklin said the store collects the silver during processing and then sells it. “We’re able to recoup some of our money with the recovered silver,” he said.

John Gray has worked in the metals industry for 30 years, and owns a company that recovers silver from companies in the Carolinas, Virginia and east Tennessee. Clients include printers, photo processors and newspapers, including The Charlotte Observer.

As to silver’s rise, Gray said: “It can be a good thing. It can be a bad thing.”

A good thing because the silver he collects can fetch higher prices. A bad thing because rising prices encourage potential competitors. It also can put the company more at risk if Gray signs contracts to buy silver at a certain price, and then market prices change significantly.

(via Charlotte Observer)