Firoz Merchant, founder and chairman of Pure Gold Group, says his company intends to open at least one store every year in the UAE. Image Credit: Supplied

Dubai: Pure Gold Jewellers has kicked off its multi-million dirham expansion effort in India with the opening of the first of 200 stores the company plans in the country in the next five years.

"Within the next three months, seven more shops will open and two more will follow shortly," Firoz Merchant, founder and chairman of Pure Gold Group, said.

The jewellery chain, which has about 50 stores in the UAE and a total of 75 in the Gulf, is making an aggressive entry into the Indian market to capitalise on its growing population, as well as consumers' rising discretionary income and traditional affection for the yellow metal.

In the next five years, the company hopes to generate $1 billion in revenues in India. The retailer also intends to open at least one store every year in the UAE.

"We're expanding heavily in India because it is a big market with a huge population. Its people are very cultural and traditional, and they buy and value gold as a means of savings. Also, jewellery demand is growing, as the young population is becoming more fashion conscious," Merchant told Gulf News.

"In the UAE, our business is still doing very well. In fact, gold jewellery sales increased by 40 per cent in the first quarter this year compared to the same period in 2009. Diamond jewellery sales also increased by 55 per cent in the same period," Merchant added.

In spite of high local currency gold prices, the World Gold Council (WGC) is bullish that demand will be strong during 2010, driven by growing appetite for jewellery in China and India.

According to the WGC's Gold Demand Trends report published on May 26, India was the strongest performing market in the first quarter this year, as total consumer demand surged 698 per cent to 193.5 tonnes.

In the Middle East, the UAE market was resilient, with demand increasing 27 per cent to 21 tonnes in first quarter 2010. Saudi Arabia had the highest increase in the region at 35 per cent, with Egypt far behind at 15 per cent.

"With the global econ-omic recovery still burdened by high and rising debt levels in Western economies, as well as the renewed threat of recession driving down the US dollar and equities, the outlook for gold as a liquid, reliable asset class and as a store of wealth remains highly favourable," Aram Shishmanian, CEO of the World Gold Council, said in a statement.

Merchant agrees with the WGC forecast, saying that consumers still have a "huge confidence" in gold as a reliable asset class. And if recent price movements were to be reviewed, it would seem that those who invested in gold are in for higher returns

"Compare the prices. See the graphs. You will get an idea how significant the returns will be for the investors. Gold prices will reach $1,500 per ounce by the end of the year and in the next three to five years, prices will reach $3,000 an ounce," Merchant pointed out.