Luxury Jewels

Nestled on the edge of the Black Forest, the sleepy-looking town of Pforzheim seems an unlikely place for one of the world's major jewelry and watch centers. Not only are luxury pieces for brands such as Faberge, Chopard, Dior, Cartier, Versace and Tiffany produced here, Pforzheim companies are also responsible for 70 percent of the 1.3 billion euros ($1.9 billion) turned over by Germany's jewelry industry and watch industry.

Pforzheim is also home to Europe's largest jewelry center, the World of Jewelry, where visitors can wander the 4,000 square meters (43,000 square feet) of exhibition and education space and admire some of the world's most exquisite and expensive necklaces, earnings and bracelets.

At the store of the family business Leicht Jewelers, Pforzheim-born Georg Leicht proudly pointed out own of his own designs -- a stunning hand-made necklace in pink gold with chunky antique coral beads. The price tag is also stunning -- 16,980 euros.

The other items in the display case are equally beautiful and equally expensive. But it seems customers aren't put off by the high prices. According to Leicht, his company has experienced regular growth over the past decade and gold prices are just fuelling demand because people are more likely to "accept gold as being something precious."

"The media attention to gold helps us to sell gold even if it is more expensive than it was before," he said. "I don't think they buy (the jewelry) as an investment, but I think they feel good buying something they like that's not only beautiful but it keeps its worth."

Record gold high fails to dent sales

Gold prices have increased by 32 percent in the past year, and broke the $900 per ounce barrier for the first time ever earlier this week.

Gold prices aren't passed on one to one to jewelry buyers. Even in the luxury market, pieces aren't normally made up of pure or 24 carat gold because it's too soft to wear -- rather, it is mixed with other metals to produce 18 carat gold, for example.

In addition, gold isn't the only precious element in a piece of jewelry.

"You still have the costs of the other stones," Leicht said. "We don't usually produce pieces consisting only of gold. We also use diamonds, sapphires, rubies, and of course pearls, but price increases in precious stones aren't as strong as in gold."

Exports on the rise

Exports account for a third of the German jewelry sector's turnover and the majority of this is sold within Europe, however, demand outside of the continent for "Made in Germany" jewelry is growing despite the strong euro.

The jewelry maker Wellendorff, a family-run company founded in Pforzheim in 1893, sells 50 percent of its luxury exports to the United States and Japan. The company specializes in the so-called "Wellendorff rope" -- a sensual-looking chain hand-made in 18 carat gold.

"We don't see any affect from the gold prices or diamond prices or from currency," said the company's managing director, Christian Wellendorff as he carefully unlocked a display box to show off a 13 m (42 ft) long example of Wellendorff rope that retails for 120,200 euros.

"It's like you buy a piece of art; it's not really the exchange rate that makes a decision on whether you want to buy or not," Wellendorff said, adding that his company's turnover increased by 25 percent last year. "Either it's beautiful and you want to have it and then you get it, or you don't."

Workmanship influences price

Operating from an unassuming building with a view of the town's Enz River is one of the world's most famous luxury brands -- Faberge. For jewelry companies operating at the high-end of the market, such as Faberge, the cost of labor is the significant factor in determining the price.

"Traditionally Faberge is using elaborate techniques and this means the value-added is in the craftsmanship; it's not so much the material," said Marcus Mohr, the president of Faberge Jewelry.

According to Mohr, Russian-born Peter Carl Faberge, who founded the company back in 1842, once said he left the big diamonds to other jewelers and instead chose to focus on craftsmanship.

"This means we are not depending on the increase of gold or other materials," Mohr said.

Specialized skills only found in Pforzheim

Pointing to an elaborate Faberge egg in the display room, Mohr explained that its creation took six months and the efforts of some 15 highly specialized artisans. Considering German craftsmen and women earning among the highest wages in the manufacturing sector in the world, that's a lot of labor costs. According to Mohr, however, locating the atelier offshore isn't a possibility.

"These traditional techniques can only be done here (in Pforzheim), which means it is good that we are here because we have the talent," Mohr said. "It doesn't matter that we have to pay German salaries."