The Rising Cost of Luxury

Anita Loos might well change her aphorism to "diamonds are an investor's best friend." So are emeralds, sapphires, rubies, and of course gold. Prices of these and other luxury goods have been rocketing as a result of dollar devaluation and inflation-fired demand. Indeed many will continue to rise during the price freeze. Reason: most of these goods are imported, and retailers are allowed to tack on increases that they have to pay to their foreign suppliers.

Wholesale prices of large, uncut African diamonds have increased more than 50% since just before the dollar was first devalued 18 months ago. In the past five weeks alone, prices have gone up 10%. The value of other precious stones have had similar increases. At the retail level, heavy gold bracelets have risen no less than 100% and slim gold bands some 67% in the past year. A major reason is that prices of free-market gold have almost doubled since mid-1972, to $120 or more an ounce.

With the dollar weak and the stock market struggling, Americans are wary of holding on to currency or investing in securities. Instead, some are caught up in an inflation-generated psychology of spending what they have on goods that seem better than money--and are putting their cash into gem stones, jewelry and gold. The affluent are also spending much for costly furs, with the result that mink coat prices are up 20% this year. Meanwhile, the increasingly wealthy Europeans and Japanese are spending their newly enriched currencies on more and more luxury goods, adding further pressures to demand--and to prices.

This file is automatically generated by a robot program, so reader's discretion is required.