Who is going to buy gold jewelry if the price of Au keeps going up?

By Dian Vujovich

I got a call this afternoon (8/18/11) from Tobina Kahn. Like her parents who own the House of Kahn Estate Jewelers in Palm Beach, she is vice president of their shop in Chicago.

Tobina is into gold big time—selling and buying all sorts of pieces from simple bands of gold to intricate golden broaches and necklaces.

But what’s really on her mind these days is the soaring price of that precious metal. She told me it could “easily go to $2000 and ounce.” Her thinking is based on the fact that as long as the U.S. continues to print money the price of it will rise. Toss in the buzz about America going back on the gold standard and she couldn’t venture a guess about its price if that were the case.

While a rising price can mean wonderful returns for investors in gold, gold funds or those selling their gold jewelry there is a downside. And there is always a downside.

This downside has to do with how costly buying golden bobbles for the ones you love is going to be going forward. Why, the stuff could become downright unaffordable for the masses.

I interviewed Tobina and her mother Adele for a story in September 2009 for The Shiny Sheet. At that time an ounce of gold was trading under $1000 an ounce and I asked Adele if she thought it could go up as high as $1000 or $2000 an ounce. Her answer: “Oh god I hope not. That makes jewelry too expensive and we do want consumer able to buy.”

She did speculate and thought its price would go to $1500 an ounce but added that the price depended upon the economy and how the world felt about things.

Well, Adele, gold has blasted past that $1500 level and closed today at a record high of over $1824 an ounce. As for the economy and how the world is feeling, one word sums it up “stinky”.

I guess my question about $2000 an ounce wasn’t so far fetched 20-some months ago. But does my crystal ball see $2500 or $3000? Could be. But the bigger question is: If gold continues to hit new highs will that upward momentum continue? And what about that long golden Gucci chain necklace I’ve been eyeing. What’s that gonna cost around Christmastime?

Too bad the answer to those questions require hindsight vision and I don’t know anyone with that skill.

FYI, here’s a quick look back at the price of gold—much of it taken directly from that 2009 story.

President Richard Nixon took the U.S. dollar off the gold standard in 1971 and the rest, as they say, is history. A few examples:

•August 1971, one Troy ounce of gold was valued at $35 an ounce. One year later its value was $38 an ounce. In May of that same year, the U.S. devalues the dollar to $42.22 a Troy ounce.

•January 1980, gold hits a new high of $850 per ounce.

•August 1999, the precious metal is trading at $251.70 an ounce.

•November 2005, its $500 per ounce.

•May 2006, the price hits a high of $730. One month later, in June, it’s fallen 26 percent to $543 an ounce.

•March 2008, spot gold hits an all time high of $1030.80.

•January 2009, on the last trading day of January, gold closed the month at $919.50.

•October 2009, gold hits an all time high of$1056.70 an ounce.

•August 18, 2011, gold closed at an all time high of $1824.10.