Is Love for Gold Jewellery Fading in India?

The young and prospering new generation in India has come to an age and it is now becoming more precise and choosy as far as its jewellery is concerned. A notable change in its taste from tradition gold jewellery to latest diamond jewellery has been marked among the educated and employed youths, aspiring grooms and brides along with their growing sources of income.

A myth had been prevailing among Indian consumers that diamonds and diamond jewellery are unaffordable. Organized diamond jewellery chains in India, with their sustained campaigning have now become successful in eradicating this myth from consumers’ mind to a great extent. Moreover, Diamond jewelleryintroduction of certified diamonds has enhanced trust and made diamond valuations more authentic. Indian manufacturers are now reaching the mass, offering them affordable diamond jewellery to almost all economic levels. They have also introduced innovative and fashionable diamond jewellery which is cheaper by traditional world standards and targeted at the middle class.

Indian jewellery has an evolving history of about 5000 years and a taste of gold jewellery has been deep-rooted in the minds of Indian people. So it would be very difficult to change their preference overnight. Of course, the manufacturers here have been successful in recent times to turn the flow of the tastes of Indian consumers towards diamond jewellery but this is not enough as the growth of diamond jewellery demand here is still in nascent stage. This shift in taste has been noted in big cities of India where about 30% of population reside, rest (about 70% of population) resides in rural areas. Therefore, gold jewellery sales will still see volume growth thanks to this factor.

But this is a good beginning and what needs to be done to carry forward this shift is to become more focused on rural areas of India with a sustained campaigning to bring awareness about diamonds and diamond jewellery. The World Diamond Mark Foundation (WDM) which is about to launch its generic promotions for diamonds soon can be a great help for driving diamond jewellery demand growth in India.

It would be encouraging for India’s diamond jewellery manufacturers and retailers to see that consumers here are becoming more modern and less traditional. They have shown a willingness to shift from traditional gold jewellery and to try jewellery made from other precious commodities like diamonds and platinum. Besides sustained campaigns, the other reason behind this change in consumption patterns is that a large number of young people in India are using internet technology which keeps them informed about the trends prevailing in the world. Today, they care more about the latest design, style and seasonal trends.

Market analysts here observe that this change in consumption patterns can be credited to other factors also. The change is also being driven by price moves and currency devaluation. During last entire year, Indian consumers have seen volatile gold prices along with a steep downfall of the Indian rupee against the USD. On the other hand, polished diamonds have become cheaper. As the Rapaport Diamond Trade Index puts it, average asking price for 1-carat diamonds fell by about 18% by the end of the second quarter of this year, year-over-year.

During July 2014, diamond solitaires outpaced gold in the stock index by 10 percentage points which further dimmed India’s love for gold. Besides, the profit margins on pure gold have also gone down after the Indian government introduced various curbs on imports of the precious metal to take control over its Current Account Deficit (CAD), including higher import taxes and tougher import procedures, in an attempt to close the current account deficit. This has prompted them to popularize diamond studded jewellery among Indian consumers.

Posted by Suresh Chotai