Going, Going, Gold

“Gold price hits new record high!” was the headline yet again this week. You might think it’s more of the same old saga but it’s not. Although the price of gold has been rising steeply for several years, its gain on Tuesday was the biggest one-day increase for the commodity in four months (it rose more than 2% to $1,274.75 an ounce). According to the BBC’s calculation, this means that the price of gold has risen 16% so far this year.

In their run-down of the myriad reasons why investors continue to be so seduced by the precious metal, the authors of the BBC piece left little hope for anything but a clear forecast that the price would go in only one direction – up. Then, only yesterday, The Independent broke a story that The World Gold Council’s very latest research suggested that the gold market will not, as some had been suggesting, become a bubble that will burst any time soon – and hence not be bringing the price of the raw material down with any implosion.

The only consolation the news offered the luxury industry was actually a very mixed message. “The World Gold Council’s last report on the gold market predicted that continuing strong demand from jewellery buyers in the two fast-developing markets of India and China… would help keep the price high.” So what does this really mean for the jewellery and timepiece sectors – and indeed for so many other luxury companies where gold is nearly as important as it is for accessories brands?

We decided to look back at a few reports from the end of the previous quarter to give us the perspective of time – and some additional perspective on what rising demand for gold products meant in the context of the rising price of gold metal. “Swatch Group AG Chief Executive Nick Hayek Jr. said in March that gold prices posed difficulties for the world’s largest watchmaker, which uses 10 tons of the metal a year,” read a July Bloomberg report. “Exports of gold watches from Switzerland rose 3.9 percent in May, a third of the rate of total shipments, the Federation of the Swiss Watch Industry said.”

But even more revealing than this one-to-three ratio, in light of the latest price hike, were a few extraordinary sound bites from other leaders of the Swiss timepieces sector on the topic of gold prices from the same period (long before this week’s unparalleled rise). “The price of gold is more important than the Swiss franc,” said Parmigiani Fleurier CEO Jean-Marc Jacot in June. “Now we have to think about hedging gold. The gold price represents 20-25 percent of the total cost of a watch.” In that Reuters report, authors wrote that Jacot made it clear to them that, although the luxury industry was now more dependant on key currency prices staying low like that of the euro than it has ever been before, “the real issue is not currencies but the soaring price of gold, which [he] said had tripled in five years.”

Patek Philippe’s chairman, Thierry Stern, said that the firm had bought gold futures as a defense against the soaring prices. He went so far as to characterise gold prices as “a big threat [to the industry]. My major problem is, where is gold going? I have no idea. I see it every time going up, up, up.”

Engendering Loyalty – on Plastic

The PR department over at the Ritz-Carlton must be pleased. On the face of it, the press release that the hotel distributed last week is the sort of thing that normally doesn’t make anyone take too much notice. Had any other hotel chain in the world announced a new loyalty card programme, it probably wouldn’t have sparked the massive media interest that it did. It certainly wouldn’t have prompted a full-blown analysis in the Wall Street Journal complete with accompanying pie charts. That’s for sure.

But, as the luxury travel writer for the Huffington Post kindly reminded us, the situation was this: “the granddaddy of luxury hotels has finally rolled out a hotel loyalty program and now, all eyes are on the other luxury hotel brands like Four Seasons and Mandarin Oriental to see if they match the move.”

With the launch of “Ritz-Carlton Rewards”, the Ritz-Carlton is now among just a few of the top tier luxury hotel operators like Starwood’s St. Regis brand and Hilton’s Waldorf-Astoria which have introduced such an incentive. It was after consumer survey data told executives that a loyalty scheme was wanted that the firm began focus groups to explore how it would be structured and what it would offer.

“We have already brought together some of the most exclusive names in travel and retail including world class travel provider Abercrombie & Kent, fashion icon, Vera Wang, National Geographic Expeditions photography workshops and Neiman Marcus,” said Herve Humler, the president and COO of The Ritz-Carlton Hotel Company, adding that the reward programme “goes far beyond providing complimentary stays and airline flights.” A more detailed outline of the programme is available on Elite Traveler.

For its part, Starwood recently launched a program called “Moments” that allows members across the group’s hotel brands to bid at an online auction for concert back-stage passes, red carpet movie premieres, private dinners with world-famous chefs and championship sporting events. But generally, the luxury sector has been very slow to adopt loyalty programmes not least because it wasn’t long ago that they were seen as the preserve of more downmarket hospitality establishments.

AOL Travel’s blunt assessment of the news was typical: “The new program may also be a sign of how luxury hotels have had trouble filling their rooms in tough economic times.” ABC News went a step further, suggesting that the firm might soon follow it up with a branded credit card, and reminding readers that the “Ritz and other luxury hotels have had to drop rates to stay competitive. They also have been hurt by a drop-off in convention business from companies afraid to appear lavish during hard times.” The WSJ’s piece also focused on similar motives behind the scheme: “Even before the recession, the Ritz found it necessary to make changes in its high-class veneer”, it read.

All in all, the firm’s executives should be happy with the splash that news of the loyalty programme made as it shows that they are listening to their customers. But, in light of the angle of some of the coverage, maybe the PR department over at the Ritz-Carlton isn’t quite so unreservedly pleased after all.

Manhattan to Mayfair: the Catwalk

We began our peek into New York fashion week in the last edition and marked the occasion by highlighting the fact that up-and-coming designer Jason Wu started the week ranking sixth among his fellow luxury brands in terms of online buzz.

Now that the fashion pack has left New York and settled down in London, it’s time to take stock of the American catwalks. According to the same digital marketing agency that was measuring the buzz all week, Zeta Interactive, at the end of the New York shows, it was Michael Kors who topped the list. Details on the runners-up and how they tallied in terms of positive comments, comment volume as well as rank have been published on the Wall Street Journal blog.

Besides having the boost of appearing on a popular mainstream television programme like Project Runway, Kors has been fanning distribution out into the further reaches of the luxury and premium markets. So if his being number one in terms of buzz is any indication of where American luxury is going forward, it appears to be getting even more accessible.

“No heels – and no black; it’s the first time I’ve ever ever done it,” he told The Daily Telegraph “I’m in a sunshine state of mind; everything is natural, relaxed, sexy and easy.”

But there are a few stalwarts who are carrying the torch for a more precious interpretation of luxury, as was suggested by the New York Times fashion critic, Cathy Horyn.

“In recent seasons, Oscar de la Renta has sought to make his clothes more distinctive and rich, without necessarily looking materialistic… That approach hasn’t changed,” wrote Horyn about the new collection. “Mr. de la Renta, one of the last of the big-time Seventh Avenue dressmakers, who has built a following in Europe, seemed to be saying the rich are spending more. More interesting, they are tilling an old-fashioned garden of conservative tastes.”

A glimpse of this mood can even be seen in the generation of designers who now find themselves neither upstarts nor establishment but somewhere in between.

“We wanted it to be a little more polished,” Jack McCollough, one of the designers behind Proenza Schouler, told Style.com about their more ladylike collection this season which repackaged some of luxury’s conservative codes but retained the expensive materials and its dedication to craftsmanship.

Next week, tune in to see how the extremes of London fashion week have reinterpeted luxury…