As gold prices simmer and stock markets wither under global economic uncertainty, diamonds have turned out to be an alternative investment asset class for the UAE investors.
Senior officials of two leading jewellery retail chains told Emirates 24|7 that retail sales have increased by 15 to 25 per cent despite prices of rough and polished diamonds jumping by almost 50 per cent in the first half of the year.
Karim Merchant, Chief Executive Officer, Pure Gold Jewellers, told the website: “We saw the prices of rough diamonds going up by 50 per cent while polished diamond prices rose in the range of 20 to 30 per cent in the first half.”
Diamond sales for his company jumped by a quarter in the first quarter of 2011 compared to the same quarter last year.
“Since prices of gold have shot up tremendously, people are considering diamonds as an investment alternative. Our business is up 25 per cent in the first quarter of 2011.”
He believes prices are stabilising and will close the year at the current level.
Tomy Joseph, General Manager, Joyalukkas Group, says: "We have seen rough diamond prices rise substantially... it was as high as 80 per cent compared to last year."
He adds that they have seen an 15 per cent increase in diamond sales in the second quarter compared to same period last year.
"Of course, a number of people are buying diamonds, but we can't say it is because of gold prices rising.”
Joseph expects diamond prices to rise further due to economic uncertainties engulfing the world.
According to market reports, diamonds are witnessing price increase due to high demand from Asian countries, particularly China and India, and due to lack of new supply.
Data released by PolishedPrices.com reveals that the value of 5 carats, about one gramme, of top quality polished diamonds is now at $150,000 a carat, about a 50 per cent increase from a year ago.
In an interview to International Business Times, Varda Shine, chief executive, De Beers, said diamonds have been one of the best performing commodities this year, with rough diamond prices boosted by a dearth of new mines, low inventories at cutting centers and increasing demand.
"In the next few years we won't see as aggressive price growth as we have seen in the last two years, but we still believe that prices are going to continue growing over the next 5-10 years," she added.
In April, the Dubai Diamond Exchange (DDE), a diamond trading platform, said the total diamond trade volumes for 2010 reached 268.7 million carats, up by 50 per cent from 178.1 million, while the value doubled from $17.9 billion to $35.1billion.
Dubai recorded a 100 per cent increase in the volume of total polished diamonds traded, reaching 163.8 million carats, while rough diamond trade rose seven per cent to 105 million carats worth $7.1 billion.