Jewellery key to gold

“Gentlemen, our fortunes depend on the greed of men and the vanity of women.”

So Ernest Oppenheimer, founder of the Central Selling Organisation, the cartel which virtually controlled the world diamond industry, was said to have summed up the forces which made the marketing of bits of cystallised carbon the most glamorous industry in the world.

(Not so, according to his son, the late Harry Oppenheimer, in a conversation with me. It was actually first said by Theodore Roosevelt)

Either way the remark could describe the fortunes – recently in decline – of the gold mining industry, with too little attention being paid to the vanity of women.

Or so one of Australia’s most accomplished gold marketers believes. Don Mackay-Coghill, chief executive officer of the Gold Corporation, attacked the past lack of support for the selling of gold jewellery at this week’s Australian Gold Conference in Perth.

The Gold Corporation has had outstanding success in marketing gold coins, produced by the Perth Mint, for some years under the vigorous guidance of Mr Mackay-Coghill.

At the conference he argued that the gold mining industry needed to pour millions of dollars into marketing gold jewellery, if it hoped to gain higher prices.

While he acknowledged there was now a growing realisation that more should be done, the opportunities lost in the past decade had cost the industry dearly.

Jewellery fabrication was overwhelmingly the largest consumer of gold, accounting for about 3,200 tonnes last year; the focus of recent efforts by the global gold industry, lobbying for increased acquisitions of gold by central banks and other financial areas had proved fruitless.

Mr Mackay-Coghill pointed out that despite occasional spikes, the gold price had been on a steady slide downwards since its historic peak of $US850 an ounce 21 years ago.

“Unless serious steps are taken to reverse this trend, I believe the price will weaken further,” he said

The step he strongly urges is to greatly increase spending on marketing gold jewellery, and cited a study of Japanese buying habits to demonstrate how vigorous advertising can stim-ulate women’s appetite for gold adornment.

It traced major spending on advertising both gold and platinum, with sales closely related to the marketing effort.

When this declined for gold, so did the growth in sales.

Mr Mackay-Coghill also recalled successful campaigns carried out in the 1980s by the South African industry, which persuaded many retailers around the world to contribute to coop-erative marketing campaigns with highly gratifying results.

The spending then dwarfed the recent budgets for jewellery promotion by the World Gold Council.

It was useful to compare the gold industry’s marketing expenditure with that of other industries. In 1998, a lowly 0.09 per cent of gold’s annual turnover of nearly $US40 billion was spent on marketing.

This compared to 5.9 per cent for wool, 6.2 per cent for dia-monds and 1.2 per cent for plat-inum. (The diamond industry, about to lift its spending, points out that advertising absorbs 10 per cent of the sales of luxury goods, and 14 per cent of perfume).

However, there was now some hope of a revival, with the Council greatly increasing its budget

for gold jewellery marketing.

Mr Mackay-Coghill also saw the continuing rationalisation of the gold industry as a positive sign.

A major problem, particularly in Australia, was the large number of individual gold mining companies, which, understandably, had to focus on finding new reserves before spending their limited resources on gold promotion.

Mr Mackay-Coghill recalled that when he arrived in Australia 15 years ago, there were nearly 260 gold mining companies – virtually all underwritten by various forms of gold financing.

This in contrast to the South African industry, where there were a few, long-established players with long-life mines and substantial, proven reserves.