[image url="http://static.businessinsider.com/image/4ad877950000000000597259/image.jpg" link="lightbox" caption="" source="" alt="Diamond" align="left" size="xlarge" nocrop="true" clear="true"]
The sharp rise in gold prices has caused Indians to increasingly buy diamonds over the yellow metal.Diamond sales have spiked 35% this Diwali season, as they are now much cheaper than gold on a relative basis than in the past.
Commodity Online: Around 25 per cent of people who purchase gold for social gifting have drifted to diamond. Again, this move also helped gold. Because, diamonds are set on 18-carat gold instead of 22-carat gold with which gold ornaments are usually made. On a diamond-studded ornament, the gold used is of lesser in purity and of lower price.
Despite the fact that some gold might be needed to set a diamond, in terms of total spending this shift into diamonds probably means less overall gold demand for the same Diwali season.
As a potential harbinger, India’s gold demand collapsed in Q1.
According to World Gold Council data, total demand in the country plunged 83 per cent to about 18 tonnes in the first quarter, as compared to 107 tonnes registered in the corresponding period last year. India is the world’s largest gold market.