Gold An Indian Perspective

Dharmesh Sodah, joint director, India, World Gold Council, has just returned from his annual holiday in China. He has slipped effortlessly into his work of promoting the prospects of gold and increasing its demand the world over. Though India’s affinity for gold is well known, he feels that there’s a limiting factor as far as designs are concerned. According to him, in the last few years, Indian consumers have evolved because of media exposure and international travel. “But, unfortunately, jewelry designs have not kept pace with lifestyles,” he rues. “We as an organization are trying to bring in contemporization so that jewelry does not stay in lockers.”

As a nonprofit organization, WGC does not have any products to call its own. So, it has tied up with strategic partners that share a similar vision and concept.

WGS’s foray into advertising was necessitated by the need to create exposure for designers. “We have to encourage designers, karigars (expert craftsmen), and students to think out of the box and be appreciated,” explains Sodah. “Firstly, it is recognition for the design fraternity and secondly, our objective is to take these designs to the trade. Some of the designs might not be commercially viable. Here, the jeweler will have to reintroduce a commercial line. So, we encourage manufacturers and strategic partners to actually produce commercially viable themes and designs.”

WGC has taken several steps to disseminate the worldwide initiative to modernize gold. Today’s generation appears to be averse to jewelry. For them, buying a flashy mobile phone is far more fashionable than gold jewelry. Though India has a young population, with 60 percent under 45 years of age, statistics indicate that this sector is moving away from jewelry. There is a clear trend that this segment finds a branded watch more fashionable. For them, it is more stylish to wear designer jeans or for that matter, buy new mobile phones every three months. Due to this trend, Sodah believes that the jewelry segment is under threat. “For this reason, we have launched a jewelry program catering to them,” he says. “For instance, we have launched a brand called Collection G aimed at the young. This line is trendy, lightweight, and affordable, to be worn on a daily basis. For the second segment, i.e., 35 years and above, there’s excellent Italian jewelry called Gold Expressions at the higher end. All in all, these are the kinds of things that prove that gold is still in. Now it does not have a traditional image, and that’s what contemporization is!”

In June 2006, seven more mining companies—Agnico-Eagle Mines, Cambior, Coeur D’Alene Mines, Eldorado Gold Corp., Goldcorp, IAM Gold, and Kinross—joined World Gold Council. At present, there are 24 companies that are members of WGC, and around 38 percent of the world’s total gold production comes from them. On inquiring whether there are any new members planning to join the fold, Sodah says, “This is a constant exercise. Most of the miners are based out of South Africa, Australia, USA, and Russia. There is a constant endeavor at the head office in London to interact with the mining community and try to get them on board. You need to understand that WGC is a voluntary organization, and it is up to the mining company to be a part of it.”

There is no paper security for such transactions. It has to be backed by gold in a physical form. In the Indian market, the Securities and Exchange Board of India is the regulator. In the budget announced in March 2005, the go-ahead was given for the launch of ETF products in India. SEBI sets the guidelines and the framework under which individual organizations can operate. There are two organizations, UTI and Benchmark, which are applying for the launch of the gold ETFs in India.

The prices of the Indian market are closely linked to the international market. Today the physical trade in gold is less than the paper trade. The pricing of gold is based on economic factors like the fluctuations in currencies of the dollar, yen, euro, et al. Politics and the demand for crude oil also play a role. However, “Though India is a major consumer of the yellow metal, it does not have much say in the pricing,” reveals Sodah. “Only economic factors contribute to pricing. So, Indian prices are a reflection of international prices.”

Sodah also addresses the vexatious issue of hallmarking that has been troubling the jewelry industry. Hallmarking is a process of certifying the gold content in an ornament. It has been in vogue for almost 400 years in various forms. In India, it has been more a self-regulatory process where a jeweler marks his own stamp on a particular product, identifying it. The Bureau of Indian Standards has a set of guidelines on the purity of various commodities specifically in terms of gold. There are authorized labs as well with the license to stamp and test the purity of jewelry. Sodah says, “Hallmarking actually tests each and every product, stamping it to conform to certain standards. It’s an independent third-party certification of the purity of gold.”

On this issue, too, there are some stumbling blocks, which WGC and BIS are trying to address. One of them is encouraging the establishment of new laboratories in the country. Also, the cost of getting a certificate is high, which the government is trying to reduce. “The government is encouraging the setting up of laboratories in every part of the country. Earlier, it was not a mandatory thing, and a jeweler could get himself registered voluntarily,” says Sodah.

Jan. 1, 2008, has been set as the date when jewelers are expected to adhere to the stringent standards of hallmarking. To ensure smooth implementation, it will be launched in a phased manner across the country. “I think it’s a step that will go a long way in promoting India’s image internationally as far as quality is concerned,” Sodah emphasizes.

With the immense growth in the retail sector, the jewelry market is set to boom. Corporate players have already made a foray into this burgeoning business. “Along with Tanishq, the Tatas are setting up a chain of outlets under the brand name of Gold Plus, which will cater to the rural and semiurban markets,” reveals Sodah. “By opening chains in small towns the company is getting retail-organized. This is one change which will be copied by other corporates, too.”

These are interesting times for the jewelry segment, which may, with the huge investment in visual merchandising and product innovation, touch unprecedented heights.

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