The Indian diamond trade seems, by and large, optimistic about holiday sales of jewellery in the USA, despite the recurrence of slackness in the US economic growth rate and the continuing high level of unemployment.
Higher Turnover Expected:
Those who expect better performance of the US market this season compared with the earlier one, argue that over the last one year, prices of precious metals have risen considerably while sparklers have also appreciated to an extent. Given this situation, the overall holiday season’s turnover in value-terms might be better than in the earlier year, although in terms of volume it might be around the previous year’s level, if consumers exercise restraint while making purchases.
Overseas Offtake Encouraging:
Some circles in the trade who are hopeful about the overall outcome, also point out that overseas buyers have already made good purchases in October 2010 in anticipation of the Christmas season. If one goes by their purchases, they too seem to be hopeful about holiday sales. However others prefer to keep their fingers crossed, till the actual outcome of the season becomes available.
Rough Market Strong:
Meanwhile, prices of rough diamonds have have gained further strength as the Kimberley Process Certification Scheme has not permitted. Zimbabwe to effect more dispatches of its Marange rough. The Surat Rough Diamond Sourcing (India) Ltd. which concluded an agreement last month with the Zimbabwe authorities to buy their rough diamonds worth US$ 100 million every month, was expecting that actual arrivals of rough from Zimbabwe would start from November, thus softening the market for rough gems. However, the K.P. meeting held in Israel in the first week of November 2010, has refused the necessary clearance. AWDC, Antwerp also sent a high level mission to Zimbabwe in another attempt to resolve the deadlock.
Bullish Impact on the Market:
The market for rough diamonds which was earlier expected to soften once the supplies from Zimbabwe started as expected, again firmed up on the receipt of reports that Zimbabwe was not allowed by K.P. to effect further shipments of its Marange diamonds.
DTC’s Price-Hike:
Close on the heels of this development DTC raised its prices of rough at the November 2010 Sight imparting additional firmness to the market. According to trade sources, this hike was in the range of 5 to 7 per cent generally but even more in some cases. Also, there were some changes in the boxes which, in some cases added to the real price adjustment. Those manufacturers who have set up large factories had no option but to buy rough at the prevailing rates. This, alongwith some speculative activity added strength to the market for rough.
Size of November Sight:
The size of the November DTC Sight, according to trade sources, was around US$ 515 million, inclusive of some Ex-plan allocations.
Manufacturers’ Complaints:
Manufacturers by and large, complained that while prices of rough gemstones were rising, there was no commensurate improvement in the prices of polished diamonds.
Tight Money Conditions:
Money conditions remain tight as can be seen from the fact that the interest rate on loans from non-banking sources remain as high as 15 to 20 per cent per annum.
Major Defaults Too:
Two major defaults last month have not only shocked the trade but some banks as well. The banking sectors’ outstandings to the diamond sector are said to be pretty high.
Jump in Diamond Dispatches:
Meanwhile shipments of cut and polished diamonds from the country in the first half of 2010-11 have totaled US$ 12,714.83 million (Rs. 58,606.45 crore), against US$ 7,870.91 million (Rs. 38,194.32 crore) in the same period of the preceding year, indicating a jump of about 61.54 per cent in dollar-terms and 53.44 per cent in rupees. In terms of caratage also dispatches have been up by 11.65 per cent at 313.37 lakh carats, against 280.67 lakh carats in the same period a year ago.
Rough Imports Rising:
Imports of rough diamonds in the first half of 2010-11 have been around US$ 5,711.94 million (Rs. 28,396.16 crore), compared with US$ 3939.44 million (Rs. 19,111.83 crore) in the same period of the earlier year.
Arrivals of cut and polished diamonds rose in the first half of 2010-11 to US$ 8,397.51 million (Rs. 38,846.79 crore), compared with US$ 4,884.15 million (Rs. 23,699.78 crore) in the same period of the preceding year.
Gold Jewellery Exports Upbeat :
Exports of gold jewellery in the first half of 2010-11 have also been up at US$ 5,340.46 million (Rs. 24,573.98 crore), compared with US$ 4,448.75 million (Rs. 21,606.29 crore) in the same period of the preceding year, showing a rise of 20.04 per cent in dollars and 13.74 per cent in rupees.
Bullion Hesitant :
Bullion turned hesitant by mid-November 2010, as some countries were reported to be contemplating raising interest rates and even imposing capital controls to thwart the possible rise in inflows of cheap foreign funds in the wake of the “Second Quantitative Easing” announced by the USA in the first week of November 2010. The yellow metal lost some ground from the recent high and was quoted at US$ 1,359.90 per ounce on November 16, while silver too eased marginally to US$ 24.45 per ounce. A few days earlier gold had crossed US$ 1,400 per ounce mark. In the domestic market standard gold was placed at Rs. 20,085 per 10 grammes, while silver was traded around Rs. 40,085 per kg.
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