HACKENSACK, N.J. - The run-up in gold prices is driving jewelry prices higher, and it also is driving more people to buy jewelry as an investment, giving jewelry stores a boost after a tough 2009.

"The rise in gold prices raises the value of all the jewelry people already own," said Nancy Schuring, owner of Devon Fine Jewelry in Wyckoff, N.J. "That is an affirmation that, 'Hey, I bought something and it got more expensive.' " Gold has gained 26 percent this year, reaching a record $1,432.50 an ounce last week.

Gold prices that have been on a steady climb for the past seven years have fueled a "cash for gold" frenzy, with one national company advertising on the Super Bowl, and charities holding "turn in your gold" parties to raise funds. Many jewelry stores stayed afloat during the retail recession by buying gold jewelry and reselling it to refineries.

All the "We Buy Gold" signs created a new consumer mind-set that they can "cash in" old jewelry for new pieces, which is helping boost sales this holiday season.

"People bring stuff in and they basically do a trade-in, like a car," said Stevan Buxbaum, president of Buxbaum Jewelry Advisors, an affiliate of liquidation and turnaround specialist Buxbaum Group. "They sell some of this, and they get credit and they turn around and buy something else," said Buxbaum, who is seeing signs that jewelry stores will have better-than-expected sales this holiday season.

In Wyckoff, Schuring said, "We're accepting a lot of gold as payment, so old jewelry is brought in and it turns into new jewelry."

"People appreciate jewelry now because they're seeing the intrinsic value of it due to the whole cash for gold thing," Buxbaum said. "People all of a sudden realized, 'Hey, I can't go buy a Ralph Lauren blouse and three years from now go sell it and get anything for it.' But they can take a piece of jewelry and get something for it."

The run-up in gold has also caused silver to become more fashionable this holiday. A recent Tiffany holiday catalogue featured silver pieces almost exclusively. Manufacturers have also changed their product lines to keep jewelry affordable. "More companies have created jewelry with semiprecious stones - and even precious stones, diamonds - set in silver, which you just didn't see before," Buxbaum said. "Now it's fairly common."

Silver prices have risen dramatically this year as a result of that increased demand, but the price per ounce still is a fraction of the price of gold. Silver hit a 30-year record of $30.75 an ounce on Tuesday.

The price difference has caused jewelry designers and craftspeople to switch to silver or combined silver-gold pieces for their creations.

In Englewood, N.J., Manuel Pinzon, who creates rings, bracelets, and other items in his workshop in a corner of his store, Arielle's Gallery, said he is doing more work these days with bi-metals - sheets of silver covered with a solid layer of 18-karat gold, which he shapes into his designs.

"Using bi-metal keeps the price of each piece down," Pinzon said. "One shopper walked in and looked at a piece that was about $149 and she said, 'That cannot be gold.' And I said, 'As a matter of fact it is,' and she was shocked."

Jeffrey Agnello, owner of American Coin & Stamp Co. in Clifton, N.J., is doing a brisk business buying gold jewelry and selling the types of gold products in fashion with investors - gold bars, American Eagle gold coins and Krugerrands. "We cater to investors and people who are afraid of inflation," said Agnello, whose store is one of the state's largest coin and precious-metals dealers, with a seat on the commodity exchange.

Agnello, whose shop was started by his father in 1955, said he cautions his customers that "gold comes down faster than it comes up." Over the past seven or eight years, "it's done nothing but go up over the long run, but that doesn't mean that tomorrow gold doesn't go down $50 an ounce," he said. "Along with these record high prices, we have had extreme volatility. For example, (last Tuesday) there was a $29 spread between the high and the low. It used to take a year for gold to move $29. Now that's happening in an hour."

(c) 2010, North Jersey Media Group Inc.

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