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Meeting Nirmal Sethia in London

Published by The New York Sun on 2005-02-02

Sitting in the richly paneled study of his antiquities-filled house in London's ultra-affluent Hampstead section, Nirmal Sethia makes a flat-out prediction.
"The price of gold is now about $422 an ounce -- in less than five years, it's going to top $800 an ounce," he says. "I believe that figure could even go beyond $1,200 an ounce."

In the rarefied business circles of Britain, America, Europe, Russia, Africa and Asia where he's a major player, the 60-year-old Mr. Sethia -- let it be said that he doesn't look a day beyond 40, the result of a rigorous daily regimen of exercise and vegetarianism -- has long been known to make bold predictions.

Four years ago, appearing before the London-based World Gold Council, he elicited gasps from representatives of the organization's 23 producers (from 12 nations) by declaring that the price of the metal, then $256 an ounce, would shoot beyond $400 an ounce by 2004. In the event, he was proven right.

"I don't make these predictions based on just intuition," Mr. Sethia said, sipping Newby tea, a premium brand that he markets globally. "I make my predictions after due diligence and studying market conditions very, very carefully. And I study a country's political milieu, and its social psyche. I'm not just a businessman; I'm a student of human nature."

Gold prices will rise because human nature is driving the law of supply and demand, Mr. Sethia said. There are some 35 gold mines in the world today -- four of them belonging to him in Russia's Siberia -- and they produce around 2,500 tons each year. (Forty percent of that production comes from mines in South Africa.) But the current world demand is 4,000 tons.

So how is that demand being met?

Central banks, which hold reserves of 20,000 tons of gold, have been discreetly selling on world markets, Mr. Sethia said, adding that ever since the earliest gold jewelry of the Sumer civilization -- in between the Tigris and Euphrates rivers in southern Iraq around 3000 B.C. -- only 145,000 tons of gold has been mined. The current estimate of global gold reserves is 3 million tons, but that doesn't mean that all of it can be mined. (Typically, it costs about $240 per troy ounce to mine gold, and new mines can take up to three years to become fully functional.)

And where's the demand coming from?

"From India and China, where else?" he said. "Between them, these Asian giants have 2.4 billion people, more than a third of the world's population. Gold is part of the cultural ethos in both nations. It has religious connotations, too -- connected to Hindu and Buddhist temples. Even the poorest of the poor wants to possess an ounce of gold."

Mr. Sethia quoted the chairman of America's Federal Reserve System, Alan Greenspan, who famously said: "Gold still represents the ultimate form of payment in the world."

India -- the country of his origin -- is buying more than 1,000 tons of gold annually, representing a fourth of world demand. India, in fact, is the world's biggest repository of gold jewelry, although America -- which has 8,000 tons -- Germany and the International Monetary Fund hold the largest official reserves of the metal. Much of India's demand comes from its burgeoning middle class, now said to be 300 million people in a country of 1.2 billion.

This middle class, already the world's biggest cohort of English speakers, is expected to double in the next decade as the economy clips along at an impressive annual growth rate of 7%.

And China's middle class may well increase 10-fold in the next decade to more than 300 million, from the current figure of 30 million in a country of 1.3 billion people.

"Indians, Chinese, they all want gold," Mr. Sethia said. "If this prognosis is right, nobody except God can stop the rise in gold prices to $1,200 an ounce."

If that happens, he would stand to benefit hugely. Along with Jocelyn Waller -- of Avocet Mining, the world's biggest producer of tungsten -- Jeremy Marshall, former chairman of the British Airport Authority, and Anglo-Gold Ashanti, Mr. Sethia formed Trans-Siberia Gold, or TSG; the company's market capitalization is more than $100 million. Other shareholders include France's Societe General and the Firebird Fund, which deals in publicly traded Russian equities.

This year, TSG is expected to produce 300,000 ounces of gold from its mines in Asacha and Rodinka in Kamchatka and Veduga, north of the Siberian capital of Krasnoyarsk. These mines have known reserves of more than 3 million ounces, and TSG seems well on its way to becoming one of the world's top 10 gold producers.

The wealth that will accrue to Mr. Sethia will be just a bonus, however. A company in which he's an investor, KBA Giori, supplies 99% of the world's banknote printing machinery; another Sethia-affiliated company, Sicpa, provides 85% of the ink used in manufacturing banknotes in America, Britain, the 25 countries of the European Union, China and India, among other places.

"You can create jewelry but you cannot create gold -- you can only excavate what God has already put down there," Mr. Sethia, getting up to go upstairs to his family shrine for the evening prayers. "I'm always mindful that human enterprise is simply another way of serving God. At least, that's the way it should be."

Pranay Gupte,
Senior Writer and Global-Affairs Columnist

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