Indians switch to diamonds from gold

De Beers says the sub-continent has become the storied diamond firm's fastest-growing market as affluent Indians eschew gold in favor of precious gems.

CNBC reports that Stephen Lussier, the CEO of De Beers Group subsidiary Forevermark, says India has now become a priority market for the world's largest diamonds supplier due to rapid growth in demand.

Lussier says India also provides the most interesting market with respect to jewellery designs. "Women wear such extraordinary pieces. You wouldn't see that in Europe unless you were having dinner with the Queen," says Lussier.

The increasing preference of affluent Indian consumers for precious gems is spurred by rising gold prices and a decline of the rupee against the dollar. Gold jewelry demand in India fell 30% year on year by the second quarter of 2012, while the rupee has fallen 25% against the dollar over the past year.

The declining value of the rupee vis-a-vis the US dollar further heightens the cost for Indian consumers to purchase increasingly expensive gold, as the precious metal is priced in dollars.

Further contributing to the appeal of diamonds is a marked decline in their prices over the same period. The Rapaport Diamond Trade Index indicates that the average price for 1-carat diamonds fell around 18% year-on-year by the second quarter of 2012.