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Dubai: Feroz Merchant, chairman of Pure Gold talks about growth in the precious metals market.
Gulf News: Why did not you enter the real estate sector when the boom started?
Merchant: I am prepared for opportunities in the property sector now. I can see Dubai's property sector growing for another 10 to 15 years. The UAE is attracting global investor interest. In the current global economic climate I think there are two businesses that are healthy: one is real estate and the second is precious metals. In the last five years whoever entered the real estate business made a fortune, the same thing has happened for those who invested in gold, silver, platinum and palladium.
Gulf News: Do you think high gold prices will hit sales?
Merchant: It is not going to affect us. Gold prices started rising two years back and gradually people have accepted high prices. In the last six months the price of gold increased more than 50 per cent, so whoever bought gold before that gained from the price increase. In 2007, our sales increased 58 per cent. This year our target is 35 per cent to 40 per cent increase. We are growing both in volume and value because 90 per cent of our jewellery is diamond and only 10 per cent is gold.
Gulf News: Where do you see the gold prices heading?
Merchant: I can only see an upward trend. By the end of this year gold will be $1,100 to $1,150. By 2012 gold could be more than $2,000 per ounce. I think gold is still cheap if you look at how much oil has appreciated. There will be corrections, but at the end of the day prices will go up. The world population is growing, so demand is there, material costs are going up and there is nothing to suggest that inflation will go down.
Gulf News: What is your manufacturing capacity? Are you expanding it?
Merchant: We have manufacturing facilities for both gold and diamond jewellery. We have one factory in Mumbai employing 350 people. We have one factory in Shanghai, which will start in a couple of months. This factory was making jewellery for the US market, but their exports are down between 50 and 70 per cent so they decided to do business with the Middle East. China is becoming a major exporter of jewellery to the UAE. It looks like China will overtake India in jewellery exports this year.
Gulf News: Is your your firm planning an IPO?
Merchant: It will happen with time. It will be happening in three to five years. We will sell 30 to 40 per cent of the company in the IPO.
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