Gold had more than tripled in value since the start of this decade, and competition from emerging markets made life increasingly hard for Italian jewelry workshops like Unoaerre, which was founded in 1926 and helped make the city of Arezzo's reputation as one of the top suppliers of the quality gold jewelry sold by internationally known retailers. They invested in research and development to manufacture similar, but lighter, items containing less gold; they used new metallurgic processes in the alloys, which improved metal strength; they started expanding into trendy accessories rather than just sticking to traditional jewelry; and some started using semiprecious metals and base metals. Despite the workshop revolution, the sellers of the finished product at the top end of the market - like Christian Dior and Richemont's Cartier in Europe, or Gurhan and Tiffany in the United States - appear to be much less affected by the new market realities. Their response to the rise in gold prices has been a combination of slightly higher retail prices and slightly lower - but still healthy - margins in-house, according to analysts. Some of the luxury brands have been saved because they buy gold in advance, while for most, margins are healthy enough to comfortably accommodate gold's rise, said Richard Farrell, research director at the luxury specialist Ledbury Research in London. In developing markets, especially India, the elasticity is much greater because available cash is customarily used to buy gold jewelry rather than, for example, putting it in the bank, and a greater proportion of an item's price is the value of the gold rather than labor, design and brand. read more

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