Why would a 1 oz bar of pure gold constantly fluxuate in price but a 1 oz 22k gold chain not change?
Looking at prices online.
In: Economics
The price of the pieces that make up a Big Mac also change daily, but McDonalds changes their prices only periodically. The cost of the raw materials is only a fraction of the price you pay, and sellers of jewelry – like McDonalds – have decided that some continuity of product price i s important to your purchase and their product marketing. So…they don’t change the prices perfectly proportional to costs.
There are products that do change prices quite a bit – e.g. you don’t expect the price of gasoline to be relatively steady, so it isn’t – partly because you’re gonna buy gas today when you need it, not after planning and thinking for a few days like you might with jewelry.
There is enough margin in jewelry that sellers have to decided to take on the little bit of margin change for the sake of a better experience for the buyer, which presumably they believe equates to more overall sales. Further, if they changed with the price of gold, they’d be saying their value IS the gold, not their “art” or their brand, etc.
There’s two reasons.
1. The price of the labour involved in designing and constructing the piece of jewelry also has to be accounted for.
2. When the jewelry was constructed, it was done using materials that were purchased at a specific cost. Just because the price of gold goes down afterwards does not mean that the ring retroactively cost less to produce. That cost has to be accounted for going forward.
The cost of materials is only a small part of the total cost of jewelry. The finished product just isn’t very sensitive to price fluctuations of the material.
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