SAN FRANCISCO — In June, Bill Doddridge flew his single-engine Cessna 400 to Twentynine Palms Airport at the edge of California’s Mojave Desert and headed for an abandoned mine, a .45-caliber pistol on his belt. He was looking for gold.

The firearm was to ward off rattlesnakes. The precious metal would be a sideline to his jewelry business. He sifted through dirt, climbed into shafts, and later bought the property, shuttered since World War II.

“If we’re not making money selling gold, we might as well get into mining it,” says Doddridge, 55, chief executive officer of Tustin, Calif.-based Goldenwest Diamond Corp., a privately held company that owns 17 Jewelry Exchange stores and an online site. “It’s a whacked-out world.”

The rising value of bullion — reaching a record $1,431.25 an ounce on Dec. 7 — has upended the economics of jewelry for buyers and sellers alike, with a mix of outcomes.

U.S. purchases of gold jewelry have fallen 36 percent by volume in three years. Women in India, where demand is booming, are buying hollow bangles made to look like solid gold. European jewelers are mixing the metal with steel and ceramics. Turkish exporters are closing offices as orders fall.

“The jewelry business is being held hostage by something completely out of its control,” says Michael Langhammer, CEO of Quality Gold, a Fairfield, Ohio, privately held wholesaler that Langhammer says is redesigning pieces to use more silver.

Gold’s price has climbed about 200 percent since a bullion-backed exchange traded fund created by the World Gold Council debuted in November 2004, allowing the metal to be acquired on the New York Stock Exchange as easily as shares.

“Gold is the only thing screwing up this business,” says Doddridge, who expects his total 2010 sales to be up about 7 percent and sales of gold items to be down about 25 percent.

At Richline Group, a wholesaler in Mount Vernon, N.Y., owned by Warren Buffett’s Berkshire Hathaway Inc., 40 percent of sales are in gold, compared with more than 70 percent in 2006, says Chief Operating Officer Mark Hanna. Signet Jewelers, with more than 1,300 shops in the United States and about 550 in Britain, is offering more silver, tungsten and titanium, says Ed Hrabak, senior vice president of merchandising.

Rome-based Bulgari, the world’s third-largest jeweler, expanded the range of rings in its B.zero1 line, which were solid gold in 2000, to include ones that mix gold with ceramics. “This is an interesting way to introduce something more appealing, more exciting to the final client, a way of proposing things that can be less expensive,” says Francesco Trapani, Bulgari’s CEO.

Tara Jewels invented Honeydium, a mix of silver, copper, zinc and indium that the Mumbai-based company says on its website gives “the perception” of 10-carat yellow gold.

In India — the largest consumer of bullion and biggest manufacturer of gold jewelry — the passion for gold bangles, necklaces and earrings is centuries old. Despite the price, demand in the third quarter advanced 36 percent, the most of any nation, according to the World Gold Council, which represents mining companies.

‘Gold-centric’ consumers

“The Indian consumer is gold-centric,” says Rajeev Sheth, managing director of Tara Jewels, which supplies Walmart stores and other retailers and owns 30 domestic shops. “That won’t change if it becomes $2,000 an ounce or $3,000 an ounce.”

The company has a plant in Panyu, China, and three factories in Mumbai, including one with 1,600 workers who walk on mats with raised ridges to dislodge gold flecks that catch in their shoes.

“Gold is a must,” says Dhara Shah, a bride-to-be, as she shops for 22-carat pieces at Dwarkadas Chandumal Jewelers, where an electronic sign displays the price of bullion in red letters.

To accommodate salaries that aren’t rising as fast as gold, retailers say they have to be creative. “The budget remains the same, the income remains the same, but they want the jewelry to look big enough,” says Deepak Tulsiani, the second-generation owner of Dwarkadas Chandumal Jewelers.

That means making lightweight pieces, and bangles that are hollow, which is more labor intensive. At the Bank brothers’ workshop in Mumbai, 90 grams of gold can be fashioned into six bangles, about 1 inch wide, in about 12 hours. Using just 55 grams takes six hours more, says Abhijit Bank, 41, who owns the shop with his 37-year-old brother Sujit.

In the workshop, in an alley past the sari wholesalers behind Zaveri Bazar, 10 craftsmen sit at wooden benches. They use blow torches to bend the metal, tweezers to place gems into earrings and conical rods to shape bangles.

“They need to be more careful, because light gold is very soft,” Abhijit Bank says, sitting cross-legged on the floor.

At Istanbul’s six-century-old Grand Bazaar, gold is so central that rents are paid in it. Locals still come seeking the bangles and coins given at weddings, births and other special occasions, but tourists who are the bazaar’s mainstay are showing less interest in gold, retailers say.

“European clients aren’t buying anymore,” says Ismail Yilmaz, who works for the jeweler Sait Koc.

Exports down

Domestic demand in Turkey was up 3 percent by volume in the third quarter, World Gold Council data show. Exports have fallen 20 percent over the past three years, according to the Istanbul Mineral and Metals Exporters’ Association, as production migrates to lower-wage countries.

The industry is squeezed by the steep price of gold and high labor costs, says Cihat Cirpici, owner of Hibas Kuyumculuk, a wholesaler that moved its operations to Dubai from Istanbul.

“People who have been in this business all their lives are moving to diamonds, if they’re lucky,” says Alaatin Kameroglu, chairman of the Istanbul Goldsmiths’ Association. “Otherwise they’re unemployed, or driving taxis.”