It’s tough enough for jewelry manufacturers to preserve their margins in the best of markets, considering factors like increased competition from low-cost overseas operators and the Internet, tougher demands from retailers, and stricter environmental and regulatory guidelines. But when metals markets are as volatile as they have been for the past year—with gold, platinum, and other precious metals reaching price levels that haven’t been seen for 20 years or more—it affects the entire industry, and has stretched already thin margins to the breaking point for many manufacturers. 

“For the past six months, the jewelry industry has been in a cash crunch, and it relates directly back to rising gold prices,” says Larry Fell, president of David H. Fell & Co. in Los Angeles. “A manufacturer with a line of credit for $30,000 used to be able to buy 100 ounces of gold with that money; now he can buy only 50 ounces. If he needs 70 ounces, he needs more money to keep the pipeline going. It’s been difficult for many companies to make ends meet, and this has tightened up everything throughout the whole industry.” 

According to industry experts, manufacturers need to focus on the following areas to maintain margins during this period of shifting metals prices.