The economics behind silver jewellery - By: Catherine Darcy

The price of silver of the past 50 years has risen from less than $1US a troy ounce in 1950 to $20 in 1980, falling back to a steady $5 through the 90's. It has been rising steadily over the past 5 years, and prices have doubled in the past 18 months as demand increases and supplies start to run low.

Now it is sitting at around $17 an ounce. The question is Why?

Silver is a commodity. It is traded 24 hours a day on the world market, with London being the centre for silver trading worldwide. The main factor affecting the price of silver is availability verses demand. If there is plenty around the price is low... if there is a shortage the price goes up. Throughout the past 55 years, changes in world industry and government control (coins used to be made from silver) combined with the discovery and exhaustion of various mines have meant that the price of silver has varied enormously.

For a detailed explanation of the silver price fluctuations over the past 55 years, check out http://www.silverinstitute.org/price/history.php.

How does this affect the price of silver jewellery?

The silver itself is only a part of the total price of the Silver jewellery that you buy. You are also buying a huge amount of time and workmanship in turning the silver into the final piece of jewellery. In the case of many pieces of silver jewellery you will also be paying for a smelting process (where molten silver is poured into a unique mould) which means more work in creating a model in clay, then creating a mould, and then casting the final piece of jewellery.

If the jewellery is imported you have shipping costs and import duties and VAT. Once it reaches the UK, it has to be tested by one of the UK Assay offices to ensure its purity and manually given a hallmark to guarantee it is sterling silver.

Then it needs to be sent back to the retailer, where it has to be stored, cared for, packed and shipped to you.

Throughout this process, people from the smiths to the assay office to the final retailer need to make a margin. This will vary depending on whether they operate online (where their costs will be low) or in a high end retail outlet with display cabinets, expensive lighting and staff (where costs will be many times higher).

So, although silver prices have more than doubled in the past 18 months, your silver jewellery should not double in price. It will have to increase but this is more likely to be 20-25% on the final jewellery then the 100% we have seen on the silver itself.

An insight into the economics behind silver jewellery pricing and the impact of the rapidly increasing price of this increasingly rare metal.

Catherine D’Arcy is the founder of Corazon Latino, an online retailer specializing in handmade silver jewellery. To see their exclusive range of designs, visit contemporary silver jewellery visit www.corazonlatino.com