Diamonds Follow Gold, Silver into Stratosphere

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"The smaller the size, the bigger the jump: Small diamonds are the most in demand."

It's not bullion alone that is breaking all price records. Diamonds are in hot pursuit. After remaining almost stagnant from 2008 to 2010, when gold was on an upswing, diamonds have now become dearer by 60%70% within the last year. And the smaller the size, the bigger the jump: small diamonds, called the "melee size," have maximum demand in the country. The bigger ones have seen a 10%15% increase.

Unlike gold, there are no fixed rates for diamonds. Their price depends upon quality and weight. However, if the basic level is considered, the price of a single carat of this precious stone has gone up by 25%.

As the economy revived in Asia, diamond demand picked up too. However, by that time manufacturers had cut down their production capacity considerably and supply could not meet the demand. High demand started with polished diamonds by the jewelry stores. This in turn put pressure on the rough diamonds business whose manufacturers jacked up the rates, said Ashok Minawala, former president of All India Gems and Jewelry Federation (AIGJF).

De Beers Group company Diamond Trading Corporation, the biggest manufacturer of rough diamonds, has increased prices after a 10-year gap.

Customers were uncomfortable by the high cost but said that had adjusted to the situation. "Costs do affect the demand but when one has to buy for certain occasions the decision is not changed," said Nandia Sahu, a customer.

Kishore Sheth of Nagpur-based Batukbhai Jewellers said the phenomenon had also led to some buying diamonds for investment purposes. The stone can be redeemed at a jewellers' counters at prevailing prices. It is expected that diamonds may be as acceptable as gold as a medium of exchange in future. The prices of cutting a diamond have gone up phenomenally too, he added.

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