Jewelers replaced the weight of gold with diamonds to keep investors' interest intact. As Urvashi Dholakia, bullion analyst at a private bank said, "Gold content in diamond jewelry should be around 35% in terms of its weight. Given the extreme volatility, jewelers have resorted to reducing the gold content in jewelry pieces and replaced it with diamonds or other precious stones."
A weakening rupee in India has also added to the local price of gold since India imports anywhere between 700 and 940 tons of gold every year.
Pravin Nanavati, joint secretary of the Gujarat Diamond Bourse said his firm had reduced the use of gold in jewelry items by 15%. "Today, the price of gold constitutes 50% of the price of a jewelry item as compared to 30% earlier. Given the high price, most jewelers are forced to try out all options to reduce the content of gold in jewelry pieces, including the cartage," he added.
For diamond studded jewelry, most jewelers advertise that the ornament is set in 18 carat gold or 14 carat gold. "For most Indians, pure gold is 22 carat or 23 carat. The only way an Indian will ever buy gold jewelry of a lesser carat is when it is studded with diamonds or precious stones,'' said Nanavati.
He added that in parts of Gujarat, business was booming for scrap gold traders as consumers rushed to take advantage of soaring gold prices to offload unwanted gold items. "There are several gold pieces that are handed down from generation to generation. Some youngsters feel that earrings or the necklace that they have been gifted has a very old design. They trade it in and go in for a new design. The new piece could have less gold than the older one, not just in terms of weight but also carat,'' said Mahesh Tripathi, gold jewelry retailer.
While Mumbai's leading scrap dealer, Jugraj Kantilal, said scrap sales had doubled mid-2011 given the high cost of gold, Sandeep Kulhalli, vice president, of an export house said the firm's growth rate in grammage terms had reduced from high double-digits to low double-digits because of the dramatic rise of gold.
Overall, India's gold jewelry demand in the third quarter fell 26% by volume to 125.3 tons, according to the World Gold Council. In value terms, however, India's gold jewelry demand rose 2% to $6.20 billion. In comparison, gold used for jewelry rose 36% to 685 tons in 2010.
Gold artisans and jewelry makers are adopting various methods to minimize the use of gold in diamond jewelry without compromising the look and feel of the ornament.
In South India, where most consumers like to flaunt their gold jewelry rather than keep it locked away for special occasions, jewelry houses have cut gold use to as low as 12%. In West India and East India, usage of gold has come down to 15% from the earlier 35%.
In the North East markets, analysts have noted that the use of gold has fallen by 15 percentage points during the quarter ending June 2011. For the September quarter, though a part of it would be the marriage season, analysts have said the decline is expected to be sharper.
Modern technology too is ensuring that jewelers reduce the overall use of gold in the ornaments. Jewelers say use of CAD, CMC and casting machines for manufacturing diamond studded jewelry is saving gold content by 10%.
Orra Jewels recently launched 'Acquila' brand diamond studded gold jewelry sets that look heavier and thicker, but are lighter in weight in comparison to traditional jewelry sets. In Chennai, Prince Jewelry, which specializes in fashionable ornaments, with gold, diamond, rubies and emeralds has also launched an entire range of light weight jewelry. Tanishq, which had launched a new collection of 22-karat lightweight gold jewelry at all its 48 showrooms across India has noticed a jump in sales.
Shivom Seth, Mineweb