The Hindu : Business : Gold investors take the diamond route now

Online edition of India's National Newspaper
Friday, May 19, 2006

Business

Business

Gold investors take the diamond route now

R. Ramabhadran Pillai

Dealers see steady demand in the diamond market

KOCHI: As gold prices continue to move up, one of the beneficiaries of the phenomenon is the trading group in precious stones. For the small group of diamond merchants, it is a golden opportunity. There has been a sustained demand for diamond and it is still on a strong path. The real issue is not whether diamonds are forever, but whether there will be enough diamonds of the genuine variety to cater to the increasing demand.

Gold prices have been moving up as never before. International factors such as oil prices and the value of dollar have had a resultant effect on the price of the yellow metal. As the prices peaked, speculations were rife that there would be a movement in the reverse order, but nothing of that sort has happened. In the absence of the slowdown, customers who were initially hesitant to buy gold at the higher range have eventually made up their mind to participate in the business. This steady demand has reflected in the sales of diamond as well, says P.P. Sunny, chief executive officer of Sunny Diamonds, an exclusive showroom for diamonds in Kochi.

Jewellery marts have been placing orders with him for large-scale purchase of diamonds. The availability of diamonds in the world market is limited and this aspect makes it a precious thing. He underlines the aspect by saying that "all the world's stock of top quality diamonds can be accommodated in a truck." Only 5 per cent of mined diamonds are listed in the best category. Millennium diamonds, issued to mark the year 2000, were limited to 20,000 pieces in the world, he said.

"The price of diamonds has never gone down. Every year, it is going up by 6 to 10 per cent,'' he said. He is confident that the trend will continue. That is the reason why he gives a `money back' offer, a guarantee to take back the diamonds sold from his showroom at the price at which it is sold if the market price falls below.

In fact, the buyers are banking on this trend and have started exchanging gold for diamond. Gold market deals have proved time and again that the yellow metal prices can fluctuate widely. Large-scale investments carry the risk of dwindling values if the gold prices crash. Such a negative scenario could be averted if gold is exchanged for diamond, according to him.

It is a challenge to maintain the value of the gold possessed by the customer at the highest possible level, observes Paresh Das, marketing manager of DTC, an international organisation engaged in diamond business. People who had invested in gold when the prices were high would not like to see the prices crumbling. Thus, a lot of `conversion' is taking place, Mr. Das said.

Branded diamond dealers have been spreading awareness and this has reflected in the market. These days customers are not preferring heavy jewellery. Instead, diamonds are increasingly being included in the jewellery for any occasion. This trend is all set to prolong and it may prove that diamonds are secure long-term investments. Of course, it could simply mean that diamonds are forever.

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