World Gold Council says gold no longer desirable

Does gold jewelry make you go “ooh” and “ahh”? For many, the answer is no unless it’s a really exquisite piece of art. This could be a problem for the gold industry, says World Gold Council CEO, Aram Shishmanian.

Sure, gold has regained some importance as safe haven thanks to the world financial crisis, but Shishmanian says the gold jewelry market will still play a major role in supporting the gold price. Except there’s one problem.

“We have lost the desirability of gold,” Shishmanian said during a breakfast talk at the Denver Gold Forum last week.

Demand for gold jewelry has waned in developed countries over the past 50 years while countries like India, where gold is central to religion, weddings and even social standing, gold has continued to be important – until recently.

“That relevance is disappearing; the 25-35 year olds who are highly educated, many of them work in call centres, are not wearing gold jewelry,” Shishmanian says.

He says the World Gold Council needs to focus on sustaining the relevance in such societies.

“We’ve got to make gold really desirable and really ignite that passion,” he says. “I use these terms because it is about how you feel about it, it is not an economic decision.”

On the large screen behind him flashes a photo of a young stylish woman in jeans and a simple top holding an MP3 player. She’s not wearing any jewelry. That is the picture that the Asian markets and the Indian markets look at, Shishmanian says. Young adults don’t see the value in gold jewelry the way their parents do.

“Their aspiration is the Ipod, it’s the Gucci handbag, and that is a real issue for us,” Shishmanian says. “The Ipod generation doesn’t see the relevance. This is particularly the case in the mature countries like North America and Europe.”

Shishmanian points out that in the U.S. there are high-end stores accessible to only the very rich – Harry Winston, Cartier, BVLGARI – and then there is the mass commoditized market selling 14 carat gold or lower, that sell gold at quite a discount.

“This is not the market we want to be in; it’s not the market we want to support,” Shishmanian says.

He suggests a creating a “middle ground” or a “premium market” to sell 18 carat gold.

Shishmanian admits that this is a huge and expensive task but if it’s not done the market will continue to decline.

“In the UK, the bulk of demand is nine-carat gold, in Germany it’s eight carats,” he says. “We’ve got to reignite that desirability.”