Avi Paz: Rise in Gold Prices Could Boost Diamond Jewelry Sales

PostBy Avi Paz Group At 04.09.2011

Gold demand in India and China jumped in the second quarter of 2011 despite record prices for the precious metal.

On August 23, gold hit an all-time high of $1,917.90 per ounce, and analysts predict that a price of $2,000 per ounce is not far off. Economists from the UBS AG bank even predict that gold could reach $2,100/ounce in three months.

Nevertheless, total gold demand rose 25% in India and 38% in China in Q2. India's consumption of gold jewelry shot up by 17% to 139.8 tons, and could continue to rise. 

India's holiday festivals, which begin with Eid in September and are followed by the traditional wedding season, are considered an auspicious time to buy gold. This year's monsoon has been good and is expected to strengthen the country's rural sector, which will probably spark an increase in gold jewelry purchases.

How will the spiraling cost of gold affect the diamond jewelry industry? "Diamond jewelry is made from precious metals – gold or platinum," says Avi Paz Group founder and President Avi Paz. "It's possible that the rise in gold could actually boost diamond sales. Instead of buying plain gold jewelry, [customers] will buy diamond jewelry in which diamonds account for most of the cost."

Paz said that the real effect of rising gold prices on diamond jewelry purchases remained to be seen during the holidays – Diwali, which is coming up in October, and of course Christmas and the Chinese New Year.