Mining firms try to rekindle gold lust
Launch ads to spur jewellery's demand
Drew Hasselback -- Financial Post
Some of the world's biggest mining companies are hoping to trigger a consumer gold rush with a US$200-million annual marketing campaign designed to boost sales of gold jewellery.
The Gold Marketing Initiative Steering Committee, whose members include Toronto-based firms Barrick Gold Corp. and Kinross Gold Corp., yesterday asked companies to donate US$4 from every ounce of gold produced into a fund that will pay for the marketing campaign. Their goal is to increase demand for the precious metal by as much as 500 tonnes per year by 2006.
"It's time for gold to do what Gucci does for luxury apparel, DeBeers does for diamonds, and other industries do to promote their own product," said Randall Oliphant, chief executive of Barrick Gold Corp. and chairman of the Steering Committee.
Gold producers are worried several factors have taken the lustre off consumer interest in gold. Key concerns include a weak gold price that makes gold jewellery look like a poor investment, competition from diamond and platinum producers, and a general lack of buzz about gold in the fashion press.
"Gold has lost some of its emotional appeal," states a report by the Steering Committee.
About 20 years ago, most gold production was sold to central banks. They bought the metal in order to back up their currencies. But over the past two decades central banks have reduced their dependence on gold. As a result, these days about three quarters of gold production is used to make jewellery.
Despite this shift, gold producers have taken few steps to address the change in the market. Central bankers did not require a sales pitch. Consumers do.
"Gold has shifted from being more of a central bank asset to being more of a consumer product. What we're trying to do as an industry is undertake an initiative that reflects that," Mr. Oliphant said.
The Steering Committee recommended the marketing program be set-up after reviewing a study prepared by McKinsey & Co.
The report that concluded a well-run marketing campaign could will spark enough new demand for gold to hike the spot price of gold by between US$30 to US$40 per ounce and increase the net present value of gold producers by between US$9-billion and US$12-billion.
The World Gold Council has previously used a marketing program to grow retailer interest in gold.
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