Traders in India Dump Diamonds for Gold Futures

Source:

"Hit by the slump in the U.S. market, Surat's diamond traders are now looking beyond precious stones to equity trading and gold futures."

Reeling under severe financial crunch following the recession in U.S., India's diamond traders in the diamond city of Surat in Gujarat state are now hunting for new avenues to tide over the situation.

Since recession has improved the prospects of gold in the global market, diamond traders are now banking on gold to make some fast bucks.

Hit by the slump in the U.S. market, Surat's diamond traders are now looking beyond precious stones to equity trading and gold futures.

In fact, many of them have already increased their exposure to gold futures over the past few months.

Diamond traders say that while they do not plan to give up their traditional business, they are looking to diversify their income stream in a bid to offset the current difficult times.

The need to look at other avenues has arisen because of a sharp fall in export demand.

Exports of cut and polished diamonds fell 26.3% to $663.2 mn in the current fiscal (up to December 2008) from the corresponding period last year. Cumulative diamond exports during the same period rose a mere 2.35% to $10.28 bn.

De Beers, world's biggest diamond producers, predicted that the rough diamonds sector will only see some recovery by 2010 end.

This has hit the hopes of diamond traders in Surat in a big way as their expectations of reviving the industry in a few months received a blow.

Global demand for rough diamonds is expected to drop by some 60% this year as the global recession hits demand for luxury goods.

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