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In a recession, all that glitters isn't gold - even the jewelry industry.

Jewelry making, once a dominant business in the Attleboro and Providence areas, downsized substantially in the 1990s in the face of imports and the transfer of traditional local products to cheap labor markets offshore.

Now the industry, facing the double threat of economic downturn and escalating raw material prices, is having to be ever more resourceful just to survive.

"There's very little gold being sold right now in stores - mostly sterling silver," said Don LeStage, whose 146-year-old LeStage Manufacturing Co. in North Attleboro is the Bay State's oldest family-operated jewelry maker. "Traffic for the jewelry retailers is way off."

Retailer Rick Foreman, owner of Crown Jewelers in Foxboro, estimates business is off about 35 percent from last year. However, the store is generating traffic from customers bringing in their old gold jewelry to redeem for cash. "More people are selling than buying," said Foreman, who also makes custom jewelry for customers.

Economic downturns frequently mean a decline in spending for jewelry and other luxury goods as consumers husband their dollars for necessities.

On top of that, jewelry makers and stores have had to stomach a runup in the price of gold, which neared $1,119 an ounce last week, making everything from gold chains to wedding rings that much more costly for consumers.

Manufacturers like LeStage, who have managed to hold their own by introducing innovative products like the company's popular Cape Cod bracelet, count themselves fortunate to hold revenues even with 2008 levels.

Elsewhere, the recession, followed by the rise in materials prices, has hit the industry hard.

Total U.S. sales of jewelry were down 2.7 percent in 2008 for a total of $60 billion, according to the U.S. Commerce Department. That trend is expected to continue this year.

Individual jewelry businesses fared even worse.

According to the Jewelry Board of Trade, the industry's credit reporting watchdog, a total of 1,578 jewelry businesses from retailers to wholesalers and manufacturers have disappeared from the U.S. market during the first nine months of 2009.

That's a 60 percent increase over the same period during 2008.

A total of 83 jewelry businesses have declared bankruptcy so far this year, almost double the nine month total in 2008. Prestige names, while still profitable, were not spared in the downtown.

Legendary jewelry holding company Tiffany and Co. noted a 30 percent decline in revenues in the second quarter and Cookson Group Plc., the British industrial materials company that processes precious metals in Attleboro, reported a 26 percent decline in revenues in the third quarter, compared with the same period a year ago.

As bad as the industry's results were, the toll was not as high as had been expected, according to idexonline, the Internet research and reporting service of the International Diamond Exchange.

More companies would have closed, the idexonline report said, were it not for the fact that many weaker companies closed their doors in 2007 and 2008.

Jewelers of America, the national trade organization, is also inclined to be optimistic.

"The good news is that those who remain in the business now have already weathered the bad times of last year and have streamlined their inventories and businesses," spokeswoman Amanda Gizzi said.

The ones who have made adjustments are better equipped to survive long term, she said.

While the pullback among jewelry retailers is bad news for manufacturers, Gizzi said savvy jewelry makers will survive.

"Retailers still have to keep their inventories fresh," Gizzi said, explaining that designers and manufacturers who can deliver new looks at attractive prices continue to find a market.

Recently, she said, jewelry makers have been demonstrating success with larger, showier pieces made with less gold to keep prices reasonable.

Large necklaces and oversize chandelier earrings are among items currently in vogue.

"In the '80s, during the last recession, the look was minimalist," she said. "This time, more people are looking for pieces that make a statement, even if the gold is lighter weight."

Manufacturing jewelers are also showing a willingness to experiment with alternative metals, such as palladium, which costs less than half that of gold, said Peggy Jo Donahue, director of public affairs for the Manufacturing Jewelers and Silversmiths Association.

Even materials such as stainless steel and brass are beginning to appear at jewelry counters.

Throughout the industry, the new realities of economic recession and high costs are favoring nimble companies that can respond through innovation, said Jewelers of America's Gizzi.

Specialized jewelers that have the capacity to manufacture custom pieces in small lots or even recycle old gold in to one-of-a-kind items have been bright spots.

At Attleboro's Jewelry Makers Outlet, owner and jewelry designer Nancy Young has prospered by turning old or broken jewelry into new pieces.

Young, anticipating higher gold prices, purchased her holiday jewelry inventory early to keep down costs. But she said many consumers are excited about having new, one-of-a kind jewelry items made.

"People can bring in their broken or outdated jewelry and you can create a whole new item for them," she said.

Because of the higher prices being paid for gold, Young said, gold left over from the custom manufacturing process can be enough to pay for the new jewelry.