In response to the dramatic surge in silver prices over the past year, Pandora, the renowned jewelry manufacturer, has announced its strategic pivot to offering platinum-plated jewelry. This move is designed to mitigate the company's dependency on silver and manage the escalating costs of raw materials. The decision comes amidst a period of significant volatility in precious metals markets, where both silver and gold have experienced substantial price increases, impacting production costs for jewelers and other industries.
Last year, the cost of precious metals saw a steady climb, primarily fueled by global economic uncertainties, geopolitical tensions, and a weaker U.S. dollar, driving investors toward safe-haven assets like gold. However, the true acceleration occurred in the latter part of the year, as tech stocks faltered, leading investors to pursue momentum in the metals markets, causing prices to skyrocket.
Pandora's CEO, Berta de Pablos-Barbier, emphasized that this innovation will enable the company to navigate the new landscape of raw material expenses while continuing to provide consumers with high-quality, durable precious metal jewelry suitable for daily wear. This strategic shift is particularly crucial for Pandora, as silver accounts for nearly a third of its cost of goods sold, making it the largest single production expense. In contrast, gold represents only 8% of these costs, highlighting the disproportionate impact of silver price fluctuations on the company's financial health.
The precious metals market experienced a severe downturn earlier this week, with gold and silver recording their most significant sell-offs in decades. Despite this recent dip, the prices of these metals remain considerably higher than they were a year ago. Silver prices have surged approximately 140% in the last 12 months, while gold has seen a 70% increase. This volatility underscores the challenges faced by manufacturers relying on these commodities.
Although Pandora employs hedging strategies to stabilize its purchasing costs—aiming to shield at least 90% of its silver and gold acquisitions from price volatility this year—the company acknowledges that commodity price increases could still reduce its profit margin by as much as 2.5 percentage points, a more significant impact than tariffs. While platinum is not immune to market fluctuations, its price increases have been less pronounced compared to silver. As of Thursday afternoon, platinum was trading at $2,070 per ounce, approximately double its price a year prior.
Pandora is not alone in adapting to the elevated cost of metals. Other jewelers are also innovating, with some opting to create hollow gold pieces or blend gold with silver to maintain affordability for average consumers. Some designers are even exploring alternative materials like brass, hoping consumers will not discern the difference, reflecting a broader industry trend toward cost management and material diversification.