Soaring Gold Prices Strain Devon Ave. Merchants
Here's a number to remember: 1214. That's how many dollars it costs to buy an ounce of gold, the morning I walk into Raj Jewels.
Half-a-dozen saleswomen are sliding trays of intricately carved rings and glowing, yellow bangles into glass display cases. And in a back room...
(sound of prayer chanting)
Keshavlal Lakha comes to his son's store every day to offer a morning prayer for health and good fortune. It's not immediately clear that this, the Taj Mahal of Devon Avenue jewelry stores, needs more good fortune, but...
DIPEN LAKHA: We're down, I would say, close to 30 percent from '03.
Dipen Lakha comes from a long line of Indian goldsmiths. But no one in his family has ever seen anything like this before. Remember that number we started with? 1214? Well, back in 2003, Lakha's best year, gold was selling for only $363 per ounce.
VITHA: Once it crossed 400, it basically never looked back.
That's Ramesh Vitha, owner of Vitha Jewelers across the street. When his dad started the business in the '70s, Vitha says things were different.
VITHA: I remember once some 15 years ago the price of gold went up by $1, and that was big news. Now, it goes up and down $50 any day, and you don't even hear about it.
What's changed is the number of speculators who see gold as an alternative to other investments, like currencies or stocks. They're trading shares of gold online, rapid-fire, which can exacerbate swings in gold prices. And that makes things tricky for Devon Avenue gold merchants.
(sound of typing on keyboard)
VITHA: Just two minutes ago it was $1228, now it's $1230. So it's gone up $2 in the last 5 minutes.
If the price changes by more than $100 in a day, most merchants will re-price their merchandise. But the bigger question is: is this whole climb in gold prices a bubble?
If it is, Vitha says he and other Indian jewelers will face massive losses when it pops. That's because they've bought most of their merchandise -- high-content, 22 karat gold -- at peak prices. Once it goes down, they'll have to sell it at its new price, losing the difference.
Adding to the uncertainty over how the market will value gold is the question of how the culture values it. Traditionally, Indians use gold as a form of banking. They hoard it when times are good and cash it in when times are bad. Women often receive their share of the family inheritance in the form of gold jewelry, at their weddings.
But some in the younger generation don't have this traditional tie to gold. They'd rather see the money spent on a down payment on a home. If they do want jewelry it's often of a different kind.
RAMI: Silver is kind of in. I think when they see, like, yellow gold it's more old-fashioned.
Jigna Rami is a young Indian-American. She walked into Vitha's store looking for a nose ring made of white gold. Rami could only find yellow gold nose rings.
RAMI: You don't even find a lot of clothes, a lot of Indian clothes, that can go with it. And then when you're wearing American clothes, I wear the nose ring with it. And it's like I have silver, and then a yellow nose ring just doesn't go.
Vitha and other merchants have started carrying white gold and diamonds to cater to young customers.
VITHA: They're not buying it as a concept of store of value and as an investment, but just as jewelry.
Vitha says this changes the whole business model to be "more American," where jewelry stores sell luxury items, not necessities. But he says as long as Indian immigrants continue to arrive, there will always be a cultural tie to gold.