Wednesday, April 20, 2011

Metal Prices and the effect on Craft

The number says it all- today Silver prices shot up over $45 dollars an ounce. I've never seen it so high- well, never have been really tuned in when it was high before...

In late 1979 I was in 8th grade, in Durham New Hampshire. We had just moved there from Newark Delaware a few months before. One of my memories of that time was a discussion that happened in one of my classes about the rising cost of silver- This was the time when "the Hunt brothers" (Nelson and William Hunt) attempted to corner the world market in silver. Prices from Sept 1979 to January 1980 silver prices rose from $11.00 and ounce to $50 an ounce.

I recall one of my classmates very excited by this because he and his brothers had been given silver stock as a confirmation gift earlier that year. At the time- the rise in prices didn't mean much to me- it only left me with a pang of "missed opportunity" and a renewed interest in my mother's jewelry box.
(don't worry, I never took anything- I just would dream of each piece of silver making me "rich" like Richie Rich, the comic book character) 

However- this price increase that we are going through now is making me think very differently- I am now in my 25th year of working as a silversmith- I use silver every day, and it's price makes a huge difference to me and my business. I have a couple of shops online where I sell my silver and mixed metals designs- I chose to work in silver because it was an affordable way to start a career in jewelry. I also love silver's color and workability- It's one of my favorite materials- and it keeps getting more and more expensive to buy! which, in turn forces me to increase my prices in my shop...

Why? because I have to think about replacement cost of my work- if one piece sells, I need to replace it- even if that piece originally cost me $20 to make, with the increase in metals prices on the market, my replacement cost increases as well. In essence, if I sell a piece for the material cost when the silver prices were in their $20's, I would take a loss- because the piece couldn't be replaced for that price would be replaced at the current price of metals (plus manufacturing cost)

Wait....what? Manufacturing cost? That's right!- Manufacturing cost is added to metal when we go to the silver supply store and buy silver. You see, the metal has to be alloyed (alloying is when you take a pure metal and you add another metal to give a certain characteristic to the metal- for instance sterling is 92.5% pure silver mixed with 7.5% copper), Then the manufacturer makes the alloyed metals into forms, like sheet or wire. We metalsmiths in the US usually buy our sterling in these manufactured forms. (there is an argument also for making your own alloys, but that's a different subject all together, which I will leave for another time)-So, if metal prices are at 40$ an ounce- we are paying $40 plus manufacturing cost (which is variable, depending on the manufactured form) for our supplies...that's a great deal different than a few years ago when we thought $10 an ounce was outrageously expensive! 

So- as each trip to the silver store gets more and more expensive, I find myself faced with a dilemma- do I buy more silver? will it go up even more? can I afford to invest in more supplies right now, or do I have to re-consider my materials?

Well, I'm doing a little of everything- I'm not swearing off of silver completely- It is really a necessity for certain items like rings and earrings- But I'm not "stocking up" either.

It's a game that many 'smiths are engaged in right now, whether we want to be or not- the silver lining (no pun intended, but it's a good pun, huh) is that the rise of metals prices will have an effect on the value of skilled work. Hobbyists who have been flooding the silver jewelry market will be looking at their hobby supplies differently- due to the high "start up" cost of silver.

I believe that in the coming months there will be a further separation of professionals vs hobbyists, similar to the separation between those who work exclusively in gold vs those who work in silver. Effectively raising the perceived value of silver as a metal, and the idea that it is a metal mostly used by professionals.
I could be wrong, but that is where I see the trend heading.

That being said- I don't believe that this augmentation of silver prices will make "silver smithing as a hobby" become a thing of the past- it's just becoming more expensive to "start"- and therefore less new (inexperienced) craftspeople working in silver on the market.

My hope is that those of us who continue our silversmithing will raise the level of silverwork to a new level of craftsmanship- Therefore giving "new polish" to one of humankind's oldest crafts.

and, with that off my chest- I'm heading out to my studio to make some beautifully crafted pieces... in silver!
ciao- Maureen BZ


Erin Austin said...

Wonderful post.

MmeMagpie said...

After the initial pain in the invoice from Hoover & Strong I thought pretty long about this, too.

After much pondering and a galss or two of very good red, I came to the conclusion that higher prices are good for us. Suddenly, silver is actually precious at this price and cannot be misconstrued as cheap anymore. Thank goodness.

Now, I feel free to take the time and spend the effort to achieve that perfect polish. Free to set that spectacular stone in silver and not get laughed at.

I love silver. It's where I started and where I chose to stay. I'm thrilled that it finally gets the respect it deserves.

Maureen BZ said...

thanks for your comments- I agree- silver is getting a boost in perceived value- I only hope that we as silversmiths can survive the escalating prices! It will be great to be able to spend the time we need for real finish work, I agree!

Serendip Designs said...

This is a wonderful post. You've raised some important issues and and come to some thought provoking conclusions. Thank you so much for writing this.

We need to make sure the public understands how the price of silver affects the price of our work, and this post does that very well.

I am developing some lower end pieces, but now also feel inspired to create some more elaborate and intricate works in silver.

Michael Sturlin Studio said...

The "real" value of any metal to the practitioner(goldsmith, silversmith, metalsmith) is what the metal offers each of us as a raw material and what our skill and fluency enables each of us to do with that material.

That value might vary widely from one artisan to another. Silver is worth $50 (or more) an ounce to me because I can make it have adequate value as a completed object through my ability to create with it.

Others might find their value limitation for the material is lower than the current spot prices depending upon how much value-added-content they can contribute in the way of design and execution.

Maureen BZ said...

MDS "what our skill and fluency enables each of us to do with that material."
YES! exactly my point- I think silver price increase will raise the bar for silver design-

I believe we are in a waiting game - simply that we have to be patient for the public to understand the increase in silver's value as a material. In the mean time, less experienced hobbyists will most likely continue selling at rock bottom (undervalued) prices.(while those of us who understand replacement prices will adjust our pricing to reflect the real market value)

It is up to us professionals to
raise the standard and to educate our customers about the quality of our work,and the properties of our materials.. therefore raising the understanding of silver's status as a noble material.

kenneth said...

I for one would like to see silver go to 100 an ounce.
It is a question of metal cost to labor ratio,any professional Jeweler should be charging out their labor at at least 35 an our.Gold traditionally could absorb that rate by public perception,but it takes as long to make any piece in silver as it does as in gold,in fact silver is the more fickle of the metals,you really have to know what you are doing to get the best of silver.Gold you can mistreat as much as you want.As a professional Jeweler for 45 years I have accumulated a vast collection of "Master-Patterns" that I have made over the years mainly to be produced in gold and as I have never stinted on weight they have priced themselves off the market but they could now be resurrected in a silver format and be able to carry the higher end genuine stones--even Diamonds.
Yes it will cull out the hobbyists and give a large fright to PMC players,so I am not shedding a tear at all,perhaps at last the label "Jeweler" will be returned to professionally trained and skillful tradesperson.

Maureen BZ said...

here's a comment that I got from a friend on Crafthaus- I think she has a good point, and I wanted to share it with my readers....
from Anne Havel-
"I'd like to make one correction to above blog post. We do not "take a loss" when we sell something based on the original cost we paid just because we have to buy our new materials at a higher price. let me explain.... as above, you paid $20 for your silver and sold it based on your costs for the materials in that piece, and hopefully you made a profit. when you buy your new silver, which indeed costs significantly more, you are basically "investing" in your inventory until you sell it. it will sell based on what you paid for all your materials and then you will either make your profit or "take a loss" if you did not price it properly or could not sell it for what it is worth. the real problem happens when you have 2 similar pieces next to each other and when contains materials purchased at lower silver prices and one has the newer higher priced silver. it is difficult for the customer to digest, so we frequently will raise the price of the lower one so it does not invite difficult questions from the customer. that actually helps our bottom line which can also help when we have to "invest" so much in our new silver purchases, or many other materials, for that matter. just to reiterate, profit and loss is realized on individual items after they are sold based on the costs contained within the piece(s) sold, not based on what you have to purchase to replace what was sold. hope this helps.

studio410 said...

Excellent article and actually made me feel better. I think you are right that it will raise the bar for silversmiths.

Theresa said...

Great post, Maureen. I agree that the key is customer education.

Shirlee said...

Really great article Maureen. And I agree. When silver jumped a lot of people started switching to brass and copper but to me it seems like a perfect time to start adding some gold to my pieces. Yes, silver is now precious. that said, I'm also starting to work with titanium in the hopes of covering my bases.

Shirlee said...

Really great article Maureen. And I agree. When silver jumped a lot of people started switching to brass and copper but to me it seems like a perfect time to start adding some gold to my pieces. Yes, silver is now precious. that said, I'm also starting to work with titanium in the hopes of covering my bases.

Pagano DesignWorks said...

As a beginning silversmith I think you are absolutely right Maureen! I create jewelry out of recycled sweaters and used to use sterling findings and handmade rings to complement it. As trendy pieces, it is a hard enough sell to get my labor out of the selling price, never mind the added cost of sterling. I'm using a lot more copper and brass now. I'm saving the silver for more complicated designs.


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