Is diamond the new gold?

Hyderabad: Gold is slowly losing its glitter as investment product or jewellery, while the diamond is fast taking its place the world over including India.

After hitting $1,900 an ounce in 2011, the precious yellow metal has lost its value by 30 per cent, thus prompting the investors to move away to other forms of investments and this time around it is diamond, the precious stone.

Investment advisors are now suggesting to their high networth clients to invest in diamond for hedging, says an investment planner. It is true that a primary market is yet to be created for gemstones, but a short visit to Panjagutta jewellery market shows that diamond and other precious stones are here to stay.

“For the last two years, even middle class people are showing interested to wear the diamond jewel on them,” says a salesman in a diamond shop near Panjagutta. According to him, Indian women are being attracted to diamond – uncut variety and other colour stones, and are buying diamond pendants or rings in place of gold jewellery.

In fact, the hedge funds which are observing the attitudes of investors say that the diamond which was originally considered for an investment option by elite, is slowly moving into dressing room of a middle class girl. “They (women) are buying for daily ware in the form of pendants and rings costing to Rs 15,000 to Rs 20,000 a piece,” the market sources said.

According to a market research report, the demand for diamond is steadily increasing in US and even developing countries, as the economy is strengthening. In 2013 US imported about $23 billion polished diamonds, 16 per cent higher than 2012, the report added. Even in China, the demand for diamond is increasing, as Chinese women like use diamond rings as engagement rings, which was generally the case with American women.

Back home, even the Indian women also accepting to wear diamond and other colour stone ornaments for a regular use, which was not the case a couple of years ago. “It is evident that there is increased demand for diamond jewellery in the form of light wear, neck wear and rings,” says a jeweller in Abids, who seeks anonymity. However, the diamond buying for investment purpose still needs to catch up,” he said.

Industry sources say that the diamond market is increasing at 10 to 15 per cent annually. For instance, in Panjagutta market alone, about Rs 2,000 crore per day sales are registered on a wedding or festival seasons, where about 50 shops sell diamond jewellery, while whole of Hyderabad the total market sells over Rs 4,000 crore jewellery a day, say the sources.

The trouble here is that it is difficult to identify the best diamond and understanding the quality and price of a diamond is most difficult. Hyderabad market caters predominately the uncut variety which is being offered at Rs 15,000 to 20,000 a piece.

By: KVVV Charya