Mumbai: Not everyone is complaining about the rising price of gold. Diamond jewellery makers in India are making the most of an unprecedented rise in gold prices, and have seen sales rising smartly this festive season.

With gold prices above the key level of Rs15,000 per 10 grams, investing in the yellow metal - traditionally a safe-haven asset in India - is not being seen as a great option.

“Due to the high price of gold, people are looking at jewellery using less gold and more diamonds. This trend is a side effect of high gold prices influencing consumer choice," said Vikram Merchant, manager, diamond sales and marketing at the India representative office of global miner Rio Tinto.

Demand for diamonds is seen outstripping supply in coming years leading to an across-the-board appreciation in diamond prices and easy resale options in specific category of diamonds, industry players said.

“What is already happening is that people are viewing large stones, one carat plus, and special diamonds like fancy colours, for instance our rare pink diamonds, being considered as valuable investment options," Rio Tinto’s Merchant said.

“With long term demand projected to outgrow supply there is strong price growth potential," Merchant added.

“The return value on diamonds has been steadily rising. Diamonds are getting certified by third party labs which is a guarantee for the customer that diamond can be traded as a commodity and it shows the value to it," said Prasad Kapre, co-chairman, gem and jewellery, at the Federation of Indian Chambers of Commerce and Industry.

Top Indian jewellery firms say volatile gold prices have resulted in flat volume growth for gold products and has aided a shift towards higher margin diamond products.

“We are growing a healthy 30% in diamond sales over last year," said Sandeep Kulhalli, Vice President, Sales and Marketing at Titan Industries’ jewellery division.

“Gold (jewellery) is growing in value terms of course because gold rates having gone up, but grammage terms it is nearly flat, we are not growing much," Kulhalli said.

Gold typically has a higher share of a jewellery maker’s revenues than diamonds, but that is now changing, analysts said. Another top jeweller, Gitanjali Gems Ltd, which sells jewellery under the Gili, Nakshatra, Asmi and D’Damas brands has seen diamond sales rise faster than gold products.

“Diamond sales are up by 20 to 25% over last year.. Diamonds are doing very well and better compared to gold. Gold is also up valuewise though volumes are flat," chairman Mehul Choksi said.

The relatively stable diamond prices have enabled Indian jewellery companies to maintain price points, while at the same time racking up sales of diamond jewellery.

But it’s not just retail sales, diamond jewellery exports have also improved, said Vasant Mehta, chairman of The Gem and Jewellery Export Promotion Council (GJEPC).

“In the month of July (diamond jewellery) exports were down 30% from the previous year and in August they were down 24%, so there is an improvement," he said.

Gold to revive

However, industry participants are still optimistic of a revival in gold purchases.

“If anything picks up then it would be gold buying as India is still predominantly a gold-buying nation," said Rajesh Mehta, chairman of Bangalore-based Rajesh Exports.

“Gold has got a very strong connect with the Indian psyche. So I don’t see investment in gold changing dramatically. It will continue to be an important tool for Indian consumers," Neelesh Hundekari, principal, A.T.Kearney Ltd said.