Gold Prices are Rising – Here’s Why, and How You Can Manage These Cost Increases

There’s a good chance you’re already feeling the pinch when it comes to gold prices—they’ve risen a staggering 40% since the start of 2024! While projections do show some signs of slowing down, gold prices are still expected to rise by 8% in 2025.

So, why is gold becoming so expensive, and how can jewelry designers and retailers protect themselves against these skyrocketing costs? Let’s take a look at the factors affecting the price of gold, and how you can price your jewelry to reflect these changes in the market.

What Factors Influence the Price of Gold?

Like all commodity markets, the price of gold fluctuates daily. This is primarily based on supply and demand, but there are a few other factors at play as well. Here’s a closer look at the main reasons behind the increasing price of gold.

The Gold Market and Stocks in General

The stock market and general economic climate have a huge impact on the price of gold. When inflation is high, gold is seen as a hedge, pushing prices up. A weaker USD usually increases gold prices since it’s priced in dollars.

Also, higher interest rates make other investments (like bonds) more attractive than gold, lowering demand for gold, and as a result, gold prices. Lower rates do the opposite. The general stock market also plays a role—when stocks perform poorly, investors often move to gold, raising its price.

Currency Exchange Rates

If you’re sourcing your gold internationally, currency exchange rates also affect the price. International suppliers sell gold in their local currency, but you’re purchasing in USD. The price of gold will change daily based on the exchange rate.

Supply and Demand

One of the most important determinants of gold price is supply and demand. If demand for gold increases (e.g., for jewelry, investment, or industrial use), prices will increase. Similarly, if major mining countries like China, Australia, or Russia produce less gold, supply tightens, pushing prices up. On the other hand, if the demand for gold falls and supply is high, prices are lower.

Global Events and Geopolitical Factors

At times of economic uncertainty, like recessions, investors flock to gold as a “safe-haven” asset, increasing prices. Conflicts, trade wars, and instability also drive investors toward gold, making prices surge. And, when central banks, like the U.S. Federal Reserve, ECB, or China’s PBOC, increase gold reserves, it boosts both demand and prices.

Mining and Production Costs

Gold mining is energy-intensive, requiring oil and a whole lot of manual labor. As a result, higher energy and labor costs increase gold prices. Environmental regulations also play a role in the cost of gold—stricter regulations in mining can limit supply and raise prices.

Protecting Yourself Against Gold Price Fluctuations

Sudden changes in gold pricing make it hard to run a profitable business, so it’s important to take steps to protect yourself against gold price fluctuations. Here’s how:

• Monitor gold prices via sources like Kitco or the LBMA to anticipate cost changes.
• Use a pricing formula to factor in fluctuating costs (more on this shortly!).
• Buy in bulk during market lows to help stabilize production costs.
• Consider tiered pricing based on market conditions.
• Communicate with suppliers and negotiate long-term contracts if possible.
• Offer pre-orders or dynamic pricing if your production schedule allows.

Also, do your best to explain how gold pricing works to your customers. Help them understand why gold prices fluctuate, and why your own jewelry prices have to change to reflect that. They’ll appreciate your transparency!

Account for Fluctuations With a Gold Price Adjustment Formula

As we just touched on, you can use a pricing formula to factor in the fluctuating costs of gold and help keep your pricing in line with the market and maintain your margins. Ready for a math lesson?! Don’t worry, it’s easy. Here’s the formula you need:

New jewelry price = (New gold price per gram / Old gold price per gram) x original jewelry price

So, let’s say the price per gram of gold increases from $50 to $55, and your original jewelry item was priced at $200. The calculation will look like this:

New jewelry price = (55 / 50) x 200

55 / 50 is 1.1, which multiplied by 200 gives us a new price of $220.

Note that this is the most basic version of the formula, and essentially means you’re passing on 100% of the price increase to your customers. Another option is to calculate the increase in the cost of gold in percentage terms, which you can do using this formula:

Percentage cost increase = (New gold price per gram – Old gold price per gram) / Old gold price per gram.
Then, multiply this result by 100 to give a percentage.

So, using the same figures above, the formula will be (55-50) / 50, which is 0.1. Multiplied by 100, this gives us 10%. Once you have the increase as a percentage, you can choose how much of that to pass onto your customers.

Stay Savvy When it Comes to Gold Prices

It’s important to keep an eye not just on current gold prices, but also market forecasts. By buying gold at the right times and adjusting your prices as needed, you can keep your jewelry profitable, even when the market isn’t favorable.