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Making hay while gold shines

india Updated: Jul 06, 2008 23:22 IST

Hindustan Times
Highlight Story

Jewellers dealing in pure gold jewellery may have initially frowned on the concept of one gram gold jewellery but a look closely and you will see many of them, especially small, local jewelers, are quietly stocking up on pieces.

This is a subtle indication of rise in demand for one gram gold jewellery. Another is the rapid expansion of brands like Swarg.

"Five hundred times," is Prithviraj Kothari's assessment of how much the market for one gram gold jewellery is likely to grow in five years. "The demand for gold will reduce due to the price hike," said Kothari, who is director, Riddhi Siddhi Bullion.

According to industry watchers, those who are getting into the one-gram gold jewellery industry are doing so at the right time. Though Kothari refrains from commenting on Swarg's concept or performance, Manilal Chheda, proprietor, Swarg, was optimistic. "I expect the market to grow to Rs 2,000 crores in three years," said Chheda. "Leave out the bottom 20 per cent of the population and the rest of the chunk is our target audience which is huge."

While customers can benefit from a 50 per cent buy back option, dealing in one-gram gold involves higher profits for traders too. "You can own a piece of one gram gold jewellery for the same amount you would pay as labour charges alone for the piece in pure gold," said Vijay Chheda, co-proprietor of Swarg. Kothari pegs the profit margins at 300 per cent for retail. "You can double that in the wholesale market," he said.

Dharmesh Sodah, director, World Gold Council, Mumbai, who chose to slot one gram gold jewellery in the fashion jewellery segment, said that there is potential for the segment. "It is a vibrant segment and many people want to get into it," he said. "However, it is in no way cannibalizing the precious jewellery market."

Sodah said that fashion jewellery could never replace pure gold. "This (fashion jewellery) is a segment which is primarily for the lowest strata of society, which has the aspiration to own gold but not the means," he said. "Indian consumers are passionate about gold. There are a lot of sentiments attached to it."