In Davos, Bill Gates says he is short the dollar


By Prasenjit Bhattacharya
Dow Jones Newswires
Friday, January 28, 2005

NEW DELHI -- Indian consumers seem to have resigned
themselves to high gold prices and are no longer
postponing buying jewelry in the hope of prices falling
in the future.

"People have generally realized prices are not coming
down to where they were a year ago. So they are buying j
ewelry, largely ignoring the rising trend in world gold
prices," said Bhuwan Gaurav, head of north India
operations at Tanishq, the country's largest branded
jewelry retailer.

Tanishq is owned by India's Tata Group, which has
interests in software, telecommunications, automobiles,
and steel, among other things, with total annual revenue
of $14.25 billion.

World gold prices have risen by 10 percent over the past
six months, with prices currently hovering around
$426.50 an ounce. On Dec. 6, 2004, gold prices hit a
high of $452/oz.

"Gold prices are determined by so many complex
international factors, it's difficult for (individual)
consumers to have any rational expectations of future
price movements," said Gaurav.

A weakening dollar in 2004 has been a major factor
fueling the rally in gold prices, as investors hedged
their foreign exchange risk by investing in gold.

India is the world's largest importer and consumer of
gold, with annual consumption around 800 metric tons.

Around 99 percent of India's gold consumption is in
the form of jewelry, making it the second largest
jewelry market after the U.S.

Indian demand for gold jewelry usually peaks in the
November-December period, when the country
celebrates a number of Hindu festivals such as Diwali
and Durga Puja. This time of the year is also
considered auspicious for weddings, in which gold is
seen as an indispensable part.

"In the 2004 wedding season, Tanishq sold 40 percent
more jewelry than we sold in the 2003 season. This
shows people are not cutting back on their jewelry
purchases at all," said Gaurav.

He, however, didn't specify how much gold jewelry
Tanishq sold during the 2004 wedding season.

Gaurav said an interesting trend in the Indian gold
jewelry market now is the gradual shift in demand
in favor of branded products.

While the overall 450-billion rupee jewelry market
remained largely flat in 2004, the branded jewelry
market in India grew 30-40 percent on year, he said.

In India, jewelry is largely custom manufactured by
neighborhood jewelers who have been using
traditional designs for several decades.

But a growing breed of urban consumers is increasingly
switching to branded, over-the-counter jewelry, with
contemporary global designs from established retailers
such as Tanishq, Oyzterbay, Gili, and Sparkle.

"Part of the reason for this strong growth in the branded
jewelry market is, of course, the low base effect; the
total branded jewelry market is only around 10 billion
rupees," said Gaurav.

However, more transparent methods of pricing and assured
quality are helping the sector take market share from
traditional jewelry makers, he said.

"Branded jewelers add a certain percentage as making
charges to the existing international spot price for gold.
There are no hidden charges."

Moreover, established brands vouch for the purity of
the gold they sell, by using processes such as hallmarking.

Gaurav said the big challenge for branded jewelry
makers is penetrating the country's rural markets,
which remain the biggest gold buyers in the country.

"While Tanishq has a footprint in 53 cities and towns
across India, there is definitely a need to look at jewelry
offerings that will appeal to rural consumers."

Apart from trying to expand the Indian market for their
products, Gaurav said Tanishq is also trying to make
inroads into the international market by participating
in prestigious fashions shows.

In September 2004, Tanishq tied up with Indian
fashion designer Sabyasachi Mukherjee to exhibit its
jewelry at the prestigious Milan Fashion Week.

"Such shows provide visibility to our jewelry
globally," said Gaurav.

The company currently exports jewelry to the U.S.,
Europe, the Middle East, and Australia.


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