Thursday, February 19, 2009

Your ultimate guide to buying and pricing handmade jewelry. Part 1.

I have decided to write about buying and pricing handcrafted jewelry! Let me first assure you that there is nothing specific about pricing handmade jewelry or any other handmade crafts. So the title is misleading, but I stick with it nonetheless! I choose it intentionally to point out misconceptions associated with jewelry purchase. It is not intended to be a tutorial, nor it is intended to be full guide! However it will be a long series of blogposts, because I want make my point using a lot of examples, detailed description of work processes and critical analysis of my and other jewelers' pieces.

So what does the word misconception mean? According to Wikipedia: "A misconception happens when a person believes in a concept which is objectively false."

What kind of misconception many people have when buying jewelry? First and foremost is that they are buying precious metals and stones. The sad truth is hidden in the first sentence of this paragraph. When buying jewelry, people buying man created objects that are often made from precious metals and gemstones. So what is the difference? The difference is the the same as in buying 2000 pounds of steel, aluminum, plastic, glass and textile versus buying an automobile.

Before we plunge in the details I will summarize the most common measurements used the jewelry industry. This will help you tremendously later.

Density: Density is defined as an objects mass per unit volume.
Specific weight is defined as an objects weight per unit volume.
For detailed physics lessons the reader referred to other web sites and manuals.
In the future I will use density, acknowledging that specific weight may be more appropriate.

We need this definition to understand a few basic ideas about jewelry prices. The following example will show you the practical application of this definition:
You want to make a ring in platinum, 14K gold, 18K gold and sterling silver and would like to know how much metal you need to make this ring. If you say, well in my experience 3 grams of 18K gold is enough, therefore I will buy 3 grams of each of the other metals, then you are already screwed up on several fronts. Your 3 grams of platinum will not be nearly enough to make the ring, while you will have bought too much silver and generated a lot of scrap, that you will have to recycle.
How is this? Since the density of platinum is much higher than that of silver, equal weight of them will give you a longer silver wire, than platinum wire.Exactly how much longer? If you need 3 grams of sterling silver to make a ring, then you will need 6.21 grams of platinum, 4.38 g of 18K gold, 3.75 g of 14K gold to make that ring.

Now I will show you this information translated into materials costs. Today's spot (market or cash price. This is the current price in the physical market for immediate delivery of gold) prices for gold: ~$941/troy ounce, silver ~$13.07/troy ounce, platinum ~$1047/troy ounce.
Hey wait a minute! You were talking about 3 grams of silver, now you are giving me the prices on WHAT ounce! Troy ounce. This is the traditional weight unit used by precious metal markets. Is it confusing? Yes, but if we would like to understand the Chinese, we gotta speak Chinese, right?

So allow me to continue. The market price of gold is given for "pure" gold. As we mostly make jewelry from gold alloys, we need to translate these prices into karat gold prices. Gold is alloyed mostly with copper,zink and silver, but their prices are negligible in this case, so don't bother.

Definition: karat: means how many parts (by weighth) of gold you have in the alloy if by tradition we say that fine gold contains 24 parts of gold in 24 parts of the metal (5 grams of 24K gold contains 5 grams of gold). For example 14 K contains 14 parts gold and 10 parts of other metals. It means that the gold content of 14 K alloy is 100*14/24% or 58.33333.%. 18 K gold has 100*18/24 or 75% of gold in it.

That's it for today, I gotta do some work now. We will continue soon. Hey, why dont you sign up for updates?