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Gold prices may hit $1,800 by year-end - Firoz G. Merchant

Firoz G. Merchant.JPG
Firoz G. Merchant

DUBAI — Gold prices will continue to rise in the foreseeable future and may hit $1,800 an ounce by the end of this year due to its strong demand in India, China and other emerging markets, a top official of Pure Gold Jewellers said.

Pure Gold Jewellers chairman and founder Firoz G. Merchant said investors’ appetite for the yellow metal is on the rise due to its better rate of investment returns in the past couple of years.

He said high oil prices, economic instability in major global economies and a fear of a double-dip recession in Europe and the United States also played a key role in attracting investment in gold that keep its outlook bright in the near future.

‘Asia will be engine of growth in days to come and Middle East countries will lead the recovery in global economies as the higher crude prices will help the regional governments to spend the surplus funds on development and infrastructure projects,’ Merchant told Khaleej Times in an interview.

Pure Gold Jewellers, established in 1989, is one of the fastest-growing jewellery houses in the UAE and GCC countries. The group, which counts a jewellery and accessories line in its portfolio, operates 52 outlets in the UAE and has massive expansion plans in GCC and India.
‘Major European countries are facing difficulties to overcome inflation and debt crisis, Japan is hit by a natural disaster and the United States is also not yet come out of the recession,’ he said, adding that tougher days are still ahead for the US and other Western countries.

He said oil prices maintained an upward trend but its volatile trade has shaken investors’ trust in black gold, leaving no other option for them to invest in the yellow metal.

‘I believe oil prices are going to be out of control and will be stable at $200 a barrel during the next couple of years.’

By late Friday on London’s Intercontinental Exchange, Brent North Sea crude for delivery in July rose to $115.12 a barrel from $114.67 the previous week. On the New York Mercantile Exchange, West Texas Intermediate or light sweet crude for July eased to $99.75 a barrel from $100.35.

‘Amid considering all these situations, investors consider investment in gold a safe bet with a confidence of getting higher profit returns,’ Merchant said. He said gold prices would continue to maintain an upward trend due to higher demand in India, China and emerging markets.

‘Gold prices will be ranging between $1,700 to $1,800 an ounce by the end of this year,’ he said, adding that the prices may be touching the $3,000 mark in three to five years due to strong demand and investors’ faith in the yellow metal.

Gold rose to $1,540 an ounce by late Friday on the London Bullion Market Gold. The metal enjoyed solid gains in recent times garnering support from its status as a safe haven in uncertain economic outlook in major economies of the world.

Business unusual

Merchant said higher gold prices are affecting jewellery demand in the region and encouraging people to invest in diamond jewellery. ‘Gold sales have dropped by an average of 20 per cent while diamond sales have increased by an average of 30 per cent in the first five months of this year,’ Merchant said.

He said the bright outlook for gold boosts demand for diamond jewellery.’ Merchant added that diamond prices are also likely to increase by 25 per cent in 2011. ‘Diamond sales are on the rise as customers are diversifying from gold into diamonds due to its rising prices,’ Merchant said.

In reply to another question about Pure Gold’s business growth in second half, Merchant said, ‘We are expecting better sales and growth in the coming months, as tourism will increase and many holiday seasons are upcoming as well.’

About the expectations from the forthcoming Dubai Summer Surprises, or DSS, he said: ‘We believe it’s too early to say, as we are waiting to hear what the Government of Dubai has planned for the upcoming DSS, only then we will be able to make our predictions.’

Expansion plans

Merchant said Pure Gold’s expansion plan in GCC countries and India is ‘on track,  and expanding our business in the Gulf and India [are] according to the plan.’

The Dubai-based group plans a massive expansion drive in India and across the Gulf states. Under a $200 million investment plan in India to open 200 outlets over a period of five years, the group has so far inaugurated 18 outlets while another seven will be operational in the next three months.

‘We have signed agreements for 25 outlets and these all will be operational in three months.’

About the forthcoming outlets in India, he said the new stores are covering the entire western zone, including Maharashtra and Gujarat. ‘The northern zone is also a part of the expansion plan for India in the near future.’

GCC roadmap

On expansion in GCC countries, the Pure Gold founder said the group plans to explore the Qatar and Saudi Arabia markets. ‘Our first showroom in Qatar will be launched in June. We have a plan to open six outlets by the end of the year,’ he said, adding that the group plans to open five more outlets in the country this year due to the promising economic outlook of the country.

‘Qatar is an important market for us in the region and we are making timely entry in the country where huge investment is being made in infrastructure and development projects.’ He said 15 to 20 new malls are under construction in Qatar and Pure Gold will open 15 outlets in the country during the next three years to tap business opportunities.

In reply to a question about the group’s plan to make a Saudi foray, Merchant said: ‘We are looking for a local partner and have plans to open 25 outlets by 2015.’

‘Saudi Arabia is on the cards for next year,’ he added.

He said Pure Gold has no plan to expand in Kuwait, Oman and Bahrain.

In reply to a question about the group’s plan to expand in the home market, he said Pure Gold has put on hold expansion plans in the UAE.

‘We currently have 52 shops in the UAE and have no plans to open any more in the near future. We want to wait and watch the market conditions before making any moves,’ he concluded.

Pure Gold Group 05 June 2011.JPG

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sk chart 22 May 2011.JPG

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