Art Treasure Faces Meltdown on Records for Gold, Silver Futures

Antique Silver
A plastic dustbin of antique silver is ready for melting at the metal merchants 375 Live Ltd. in the Hatton Garden district in London. The rising price of silver is encouraging owners to melt pieces rather than sell them at auction. Photographer: Scott Reyburn/Bloomberg

Experts are watching thousands of valuable heirlooms be melted down as financial-market turmoil boosts investors’ demand for precious metals.

Gold futures are trading at close to record prices, and silver has also been at its highest in 2011. Antique jewelry is being thrown into furnaces as sellers forgo the uncertainty of auctions for a quick cash sale from metal dealers. Auction houses are having to pay more attention to melt prices as speculators watch for lots that can be snapped up below their scrap value.

Countless 18th- and 19th-century boxes, candlesticks and salvers have already been lost forever, with collectors saying that even more valuable Georgian and Victorian pieces are in danger. Gold has gained about 17 percent to records this year, with David Hightower of the Hightower Report saying prices may drop to $1,600 an ounce before resuming a climb to $1,730. While silver is down from its all-time high of $49.79 an ounce on April 25, it has doubled in the last year.

“Over the last 18 months, we’ve had more people asking the weight of lots,” said Jo Langston, Christie’s International’s head of portrait miniatures and gold boxes. “They’re looking to see if it’s more economical to buy a box rather than an ingot. We would never sell an item for less than its melt value, though.”

At the precious-metals dealer 375 Live Ltd. in the Hatton Garden district of London, plastic dustbins are filled with tankards, teapots and cutlery.

Stunning Scrap

“For 20 years, silver was 3 to 7 pounds ($11.47) an ounce,” said director Vince Clegg. “Now it’s at more than 20. The antique stuff is outweighing itself. We’re scrapping some stunning pieces.”

A Victorian Georgian-style salver and an 18th-century three-piece tea set were among the items destined for the furnace, respectively valued at 457 pounds and 800 pounds.

“Things like that shouldn’t be melted,” said Lewis Smith, managing director of the London-based dealers Koopman Rare Art. “As the price goes up, there are going to be more mistakes.”

Neil Franklin, partner in the London-based antique silver dealers N. & I. Franklin, agreed. “If it carries on like this, there will be nothing left to buy,” he said. “So much is being melted that even the pedestrian pieces will become rare.”

Sotheby’s now has to “take melt value into consideration,” said the auction house’s London-based head of silver, Cynthia Harris. “This only really applies to about 5 percent of the lots we’re selling, such as flatware and salvers. We’ve also seen some new people coming to auctions who could be described as speculators. They’re looking at heavy items like centerpieces.”

Bubble Warning

Silver was the strongest performing asset in the latest U.K. Royal Institute of Chartered Surveyors art and antiques market survey. A balance of 64 percent of responding members -- mostly auctioneers -- reported a rise in silver prices.

“It’s partly to do with a lack of trust in the financial system,” Daniel Brebner, head of metal research at Deutsche Bank, said in an interview. “If it’s not a bubble now, there’s a real chance one might be created in 2012.”

The U.S. billionaires Nelson Hunt and his brother Herbert made a systematic attempt to corner the silver market during the 1970s. Speculation -- and a melting spree -- drove the price up to almost $50 an ounce in 1980 before it collapsed.

“With so much instability, people are going into their attics,” said David Wyler, director of the Greenwich, Connecticut-based specialist dealers S. Wyler Inc., who compared the price rise to the Hunt brothers’ speculation.

Industrial Demand

The current price is helped by industrial demand. About 40 to 45 percent of scrap is bought by the solar and electronics industries, said Brebner.

“It’s had a massive impact,” Alex Bernard, a craftsman based in Sussex, Southern England, said in an interview. “Half of my customers have disappeared since the beginning of the year,” said Bernard, a member of the U.K.’s Goldsmiths’ Company.

“The rise in gold and silver hasn’t done us any harm,” Ian Goldbart, managing director of the London-based coin dealers A. H. Baldwin & Sons, said in an interview. “It just means we’ve had to revise the prices of everything on our trays.”

(Scott Reyburn writes about the art market for Muse, the arts and culture section of Bloomberg News. Opinions expressed are his own.)

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