Mumbai: David Lamb, managing director, jewellery, at the World Gold Council (WGC), is a frequent visitor to India, the world’s biggest consumer of the metal. He has been visiting the country since his days with Diamond Trading Co. (DTC), the sales and marketing arm of De Beers, where he was an executive director.
Lamb spoke about the importance of gold as a store of value, global consumer trends in jewellery and why India will remain the most important market for the metal. Edited excerpts:
New challenge: David Lamb says the patterns of consumption are changing faster in India than any other country in the world. Photo: Abhijit Bhatlekar/Mint
It’s easier to sell gold than diamonds in India. Wasn’t DTC a more challenging job?
I like that view of my life, that I’ve suddenly got it easy (laughs). There are huge strengths of gold in India. But there are huge challenges too. Any product, brand or service that presumes life will continue as it is, year after year, is not living in the modern world.
Your society and your patterns of consumption are changing minute-by-minute, perhaps faster than any other country in the world. For me, the challenge is not to take for granted the past, but always ask about the future of gold.
If you went back five to 10 years in time, the scientific use of gold was dominated by dentistry for fillings. But now that has almost disappeared. Now, the scientific use of gold is dominated by the binding wire that powers your smartphone. Your computers and smartphones would not function without the gold that lies at the core. The next generation of scientific use of gold may well be a nano-particle technology that creates new forms of chemotherapy. The scientific use of gold is 10-13% of the world’s demand and WGC’s job is not to sit there and wait for the dental market to disappear but to find new markets, uses and frontiers.I think the great thing about both gold and diamonds is you’re dealing with a raw material that has the highest level of consumer engagement. You have the most informed consumer in the world here.
With the crisis in Egypt and Libya, we are seeing a lot of investment in gold as investors move funds from other asset classes. But what happens when stability is restored?
We are dealing with not just one, but two types of crisis. We had a banking crisis that affected the Western markets that shook consumer confidence because institutions you thought you could trust disappeared almost overnight. That was shock number one.
Shock number two was obviously geo-political instability. There is a traditional function of gold which promises safety in the short term. But what is different now is that you’re seeing a revaluation of gold in a new strategic context. So, the short term is causing people to look at the long term and to revaluate the strategic role of gold in their portfolio.
People are looking at what is a clever portfolio or a clever balance of investment, underpinning their portfolio with a long-term view of gold.
Do the rising gold prices have a negative impact on demand for gold jewellery?
Absolutely the reverse. We have seen record tonnage and dramatic growth in China, and growth here consolidates India’s position as one of the most important markets for gold. Remember that jewellery represents about 77% of overall gold usage in India. And in tonnage terms that went from 442 tonnes to 745 tonnes, an increase of 69% in weight. And in local currency, that’s 101%.
We’re not at a point where price rise impacts demand because the Indian and Chinese consumers convert price into value. However, the US consumers tend to convert price into cost. We see consumers in the mass market in the West wondering if gold is for them and where it fits into their life.
The American market is a much more difficult market now. We are seeing a dramatic fallout at the bottom end of the market but growth at the very top end. So Tiffany, Cartier… the top watch brands are putting more gold into their watches.
How has the Indian consumer changed when it comes to consumption of gold?
The fantastic thing about the Indian consumer is that she hasn’t changed too much. Still 50% of the market is related to the wedding occasion. Traditionally, the market is biased towards the second half of the year around Dhanteras and Diwali, but what’s interesting is the migration of other festivals as gold buying occasions. So our job here is to keep the cultural imperatives fresh.
We also make sure the consumer is constantly entertained, because there are other choices—diamonds have seen a dramatic growth. Equally, silver has seen price increases and is being legitimized as a fine jewellery medium.
What are your marketing and advertising budgets here?
We tend not to quote budgets as almost all our budgets translate into cooperative activities. But we are spending, around the world about a $100 million.
Is gold consumption in China similar to the Indian market?
It’s quite similar. But it splits about 50:50 in jewellery and investments. So the Chinese market has a considerably larger proportionate share represented by investment bars and gift bars.
What are the key growth drivers for the World Gold Council?
When people ask what is the most important region for you I say India... India is at just under 1,000 tonnes (in terms of annual consumption), China is in the 700s, and the US at around 180 tonnes, but in some degree of decline. After these three markets there’s Turkey and Russia that are at about 60-70 tonnes a year...
The growth in the US will see a dramatic change on account of two things: the re-premiumization of gold, which would mean upping caratage from 14 to 18 carat, and regarding gold as a premium quality metal in jewellery. We are also seeing increase in direct investment in gold not as a safe haven response to short-term fluctuations but something that they should look at in their portfolio.
Do you see any interesting jewellery trends globally?
A lot of jewellery that is bought in India is worn in sets because of the dominance of festivals and weddings. In the West, everything matching is not what women want to do. Clever consumption means that you go to Zara and team it with a Hermes bag or mix Swarovski jewellery with a watch that costs $10,000. In that kind of playful landscape, women in the West are taken toward a statement piece, the one thing that really makes an impact. And the two piece types that fit into that right now are big statement earrings and a big statement cuff (not a bangle).
What has been your most memorable experience on the job both at the World Gold Council and at the Diamond Trading Co?
I have been inside the vault at HSBC and seen enormous amounts of gold and then I’ve been down a gold mine… imagine going down a lift 3,106m below the ground to see men and women drilling the ore. My most exciting diamond moment was when I held in my hand the De Beers Millennium Star, which is a single stone of 203 carats, internally and externally flawless. There are only 10 diamonds in the world that, in their polished state, exceed 200 carats and the Queen of England has most of them.