Rough diamond sales are rising as China's investors seek luxury brands

'Demand will outstrip supply' of rough diamonds over the next decade, an expert has warned

A major online auction of rough diamonds takes place in June.

India-based Arjav Diamonds will sell diamonds from Botswana and Russia in the June 9 sale, where prices are expected to range from $1,000 to $20,000 per carat.

The excitement surrounding the auction, which is only open to diamond cutting companies in Surat and Mumbai, is evidence of the growing clamour for diamonds in Asia, where Chinese alternative investors are leading a surge in jewellery buying.

Production is unable to meet demand at the world's diamond mines

Prices for rough diamonds have risen by more than 50% globally in the past six months and Des Kilalea, an analyst at RBC Capital Markets, suggests that prices could continue to grow over the next decade - good news for those investing in diamonds now.

"Demand from new markets like China and India, allied to the bedrock of sales in the traditional United States market, is likely to keep rough diamond prices firm for the foreseeable future," he told Miningmx last week .

"It appears that the supply side, in the form of new-mined output, will simply not be able to keep up with the potential growth in demand."

"In the medium term, we do not see any major threats to the upward trend in diamond prices."

Kilalea added that he expects China to leapfrog Japan in 2011 as the second largest purchaser of luxury goods behind the US.

Yuval Atzmon, a Chinese market specialist at McKinsey & Company, told DIB Online that Chinese people "have more disposable income, and a better knowledge of luxury brands" than ever before.

"Watches have seen the largest growth in sales, while jewellery sales are higher among younger people. Growth is also a result of 'trading up' to better and newer models," he added.

Paul Fraser Collectibles will keep you abreast of the latest movements on diamond prices over the coming months.

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