Little band of gold getting a whole lot dearer

David Worth from the Jewellers Workshop says the price of gold has outstripped the rise in the kiwi dollar. Photo / Natalie Slade

Financial turmoil has pushed gold to to fresh highs and sent ripples through jewellery markets from India to Auckland.

While there are signs a rebound in world stock markets could cap the sharp gains of the past week, one analyst says the top of the gold cycle is some way off.

Gold hit a record at US$1778.29 an ounce yesterday, in its biggest three-day rally since the financial crisis in late 2008 after global equities plunged on fears over the threat to economic growth from the US and euro debt crises.

One Auckland jeweller said the price of gold had outstripped the insulating effect of a high New Zealand dollar and meant the cost of making heavy gold jewellery had soared over the past two years.

Jewellers Workshop owner David Worth said items such as engagement rings did not use a lot of gold relative to precious stones and labour so had not been badly affected.

"But, for example, a heavy bracelet that was $2000 to $3000 is now $4000 to $6000 - there may be some resistance at that price."

He said it was a good time to get heavy gold jewellery revalued as owners could find themselves badly underinsured if they lost it.

Grant Partridge, owner of Partridge Jewellers, said the price of a man's wedding band had more than doubled in the past two or three years. "They're still going to get married - they're just going to have to pay more."

The firm had always sold 18-carat wedding rings but was considering using nine carat gold to cut prices.

Partridge said he had a bracelet in stock with a price tag of $2700 which would be worth more than $7000 if it was melted down.

The appreciating gold price had increased the value of his stock but not helped to sell more.

In India high bullion prices cut demand as the busy wedding season resumes later this month.

Gold jewellery is an essential part of the dowry parents give daughters at weddings. Peter McIntyre, of ABN Amro Craigs, said investors were buying gold because of the disdain for most currencies.

"We think gold has a bit to run and don't really see a bubble until about US$2000 an ounce," he said.

"They're extremely volatile times and some institutional investors are thinking a zero return is better than a negative 10 [per cent] return and that's what it comes down to at the moment."

Buyers needed to consider the value of the New Zealand dollar as well as the price of gold. The idea is to buy on a high kiwi dollar when gold prices are falling.