When it comes to jewelry sales this Valentine’s Day, all that glitters may not be gold.

With the price of gold skyrocketing – up more than 55 percent from a year ago – and the economy continuing to slow, Valentine’s Day could be less than sweet for jewelry stores and consumers alike. Adding to the jewelry industry’s woes are price increases for other precious metals, such as platinum, and diamonds.

Valentine’s Day is a crucial holiday for the jewelry industry. The six weeks leading up to Feb. 14 are the the second-busiest time of year, followed only by the December holiday season.

The cost of new jewelry – not pieces already in stock – has increased dramatically. A gold necklace that would sell for $1,000 this time last year now would go for $1,500. A pair of gold earrings has increased from $65 to $150.

The price of gold has experienced a meteoric rise, as the precious metal faces demand not only from new consumers internationally but also from investors worried about the economy. Gold prices rise when the economy is turbulent because buyers view it as a safe investment.

Gold hit its previous high-water mark of $850 an ounce in 1980, when the U.S. economy was struggling. When adjusted for inflation, that 1980 price would translate to about $2,400 in today’s market. Yesterday, gold was up $12.30 to $918.40 an ounce.

Gold prices are expected to continue to rise. If anything, that makes now a good time to buy, she said. Much of the gold jewelry in her store’s inventory was bought from wholesalers before prices began to rise in August.

With consumer confidence low, many analysts are predicting a less-than-spectacular Valentine’s Day, not only for jewelry stores but other luxury retailers. The nation’s major retail chains this week reported sales figures for January that were the worst in almost 40 years. Even former top performer Nordstrom reported a same-store sales drop of 6.6 percent.

The Jewelry Consumer Opinion Council sees a dip in the number of people who plan to buy jewelry or watches as Valentine’s gifts. Whereas more than 28 percent of those surveyed in 2006 said they planned to buy jewelry or watches as gifts, that number fell to 18 percent last year and 13 percent this year.

The increasing prices might force consumers to downgrade and retailers to downsize their profits. A customer of 18-karat gold may now become a 14-karat gold customer.

Jewelers are also looking at new ways to cut prices by combining gold with colored gemstones and even such nontraditional materials as wood. They’re also using other materials such as silver and less-bulky gold designs. Because platinum prices are also soaring, some jewelry designers are working with less-costly palladium.

Diamond prices are increasing because of tight supplies and exploding demand from such new markets as India, China and Russia. Some analysts have predicted that diamond prices could increase by 10 percent in 2008.

DeBeers, the world’s top diamond producer, yesterday announced a dip in its sales for 2007 but said limited supply, exacerbated by growing demand from China, would boost prices this year despite concerns about the faltering U.S. economy.

In fact, the whole jewelry business is changing because of worldwide demand. While the United States used to account for more than half of jewelry sales, last year it accounted for $30 billion of the $66 billion market.

Tags: diamond prices, diamonds, gold jewelry, jewelry business, jewelry sales, jewelry stores, platinum, precious metals, Valentine's gifts, watches