NEW YORK, Nov 16 (Reuters) Hit by economic fears like rising gas prices, a crumbling housing market and smaller Wall Street bonuses, U.S. shoppers may not be inclined to splurge on the most expensive of baubles this holiday.
Instead, since times are tougher, jewelry retailers are setting up to face wary consumers who may spurn expensive gold and diamonds this season, for more affordable pearls, semi-precious stones and silver.
''Across the board, all of them are going to see customers opting for less expensive jewelry items this season,'' said Pam Danziger, president of Unity Marketing, a market research firm specializing in the luxury segment.
''This season is going to a testy one for everybody,'' Danziger said.
U.S. consumers have tightened their wallets recently, hit hard by multiple problems like the dizzying subprime meltdown, huge Wall Street losses and spiking costs for food and gas.
''We are coming off a very strong summer, and yet what we are seeing in the past couple of months is pretty weak growth,'' said Kamalesh Rao, director of economic research for Spending Pulse, the retail data service of MasterCard Advisors.
Jewelry sales rose a less-than-dazzling 3.4 percent in October and 1.1 percent in September, Rao said.
For the holiday period, he forecast sales to rise 3 to 4 percent.
''The lower-income consumers probably won't even go to stores this year,'' said Kenneth Gassman, president of the Jewelry Industry Research Institute.
On the other hand, the rich will still splurge on the ,000 jewelry gift this holiday season, industry watchers pointed out.
''The strongest part is at the very high end. That is the healthiest part of the market,'' said Mark Vadon, chief executive of online jeweler Blue Nile Inc, which expects strong holiday sales.
Tiffany&Co has forecast radiant sales for the period that includes November and December. In August, Tiffany raised its full-year forecast and said it would have 14 percent growth in sales. For the fourth quarter of 2006, Tiffany reported revenue of more than 6 million.
But even the wealthy, apparently, have worries.
Though gas prices or mortgages are less of a concern, the wealthy fret over the stock market, which has experienced a volatile few months, and are ever mindful of their investments even as they spend, experts said.
''FLASH FOR CASH'' For the most part, jewelers can make up to 25 percent of their sales in December, Rao said.
In the United States, while demand is high for engagement rings, people also flock to stores just to buy a gold or diamond piece, either for themselves or for someone else.
This season consumers' impulse to trade down for less expensive items could bode well for higher-end stores that strategize and target different shopper demographics.
''There are certain luxury retailers that have pursued very successful strategies ... that involve marketing to a tier below their customer base,'' Rao said.
New York-based Tiffany, for instance, touts its sterling silver jewelry -- at lower prices for shoppers and higher margins for itself.
''We call that flash for cash,'' Gassman said. ''Sterling silver flashes but it doesn't cost a lot of cash.'' For Tiffany, its flagship store on 5th Avenue is also a massive source of revenue. Given the weak U.S. dollar and influx of European tourists, it will likely remain an area of strength.
Both for others like more affordable rival Zale Corp
While Zale's core, mall-based shoppers struggle with economic hardships, retailers, particularly independent stores, also face record-high gold prices. Gold settled at 6.40 an ounce in New York on Friday, down from its 28-year-high of 5.40 set last week.
''They are under siege already, going into Christmas,'' Gassman said.
But this holiday season, going the online route could spell success for some, since the consumer is focused on a bargain and not necessarily the buying experience.
Rao called it this year's ''hot venue'' for jewelry.
''A lot of these luxury retailers have really put a lot of backing behind selling online, to reach out to a segment that is not their traditional customer base,'' Rao said.
REUTERS SR DS1133