There’s an interesting dynamic going on in the world gold and diamond markets. India and the US seem to be exchanging appetites! The Indians seem turned off by gold while the US and other markets are jumping with both feet into buying the yellow metal because of the fading US dollar and the high price of energy. And Indians are still enthusiastic diamond buyers while the US seems not to want sparklers!

The reason for this is that the traditional bond between investments and the country’s social and religious fabric has come undone. The traditional investment vehicle has been high-karat gold jewellery and elder family women – mothers and mothers-in-law – have usually made the purchase decision.

Given the high price of gold today, the decision to buy gold in India now also includes male family members and the metal is viewed more as a pure investment than as a socio-religious symbol. Most Indians think the price of gold today is too high and not sustainable in the long run. They don’t want to buy gold now. Most jewellery for social and religious occasions is now fabricated from gold that has been recycled from old family jewellery.

 

With sagging exports to the US, the Indian diamond industry is pinning much of its hopes on the domestic market while the US consumer, with the subprime crisis and an economy sliding into recession, doesn’t seem to have the stomach for diamonds.