India’s diamond exports to the US have fallen amid a slump in demand following the Federal Reserve’s decision not to cut interest rates, which traders said dampened consumer sentiment. Purchasing power of US consumers remains muted as interest cost stays high, they said, although the holiday season saw a short-lived uptick in sales.
On the contrary, demand for plain gold jewellery has picked up in West Asia and Australia, especially as a safe haven asset at a time when geopolitical tensions are increasing.
India’s total exports of plain gold jewellery in December 2023 stood at Rs 4,983.6 crore, up 82.17% as compared to Rs 2,735.62 crore a year ago. However, exports of cut and polished diamonds fell 32% year-on-year during the month.
“Unless the Fed cuts the rate, the recovery of diamond sales in the US is unlikely. But plain gold jewellery exports will go up as it (gold) is seen as a hedging tool during the time of risk,” said Vipul Shah, chairman, Gem & Jewellery Export Promotion Council (GJEPC).
Since March 2022, the Fed has increased rates 11 times to curb inflation, which had surged at the quickest rate in decades.
The US accounts for almost 50% of the total diamond exports from India. In the first nine months of 2023-24, India’s total exports of cut and polished diamonds amounted to Rs 98,638.48 crore, down from Rs 1,32,075.49 crore a year ago.
“It is not only the Fed rate that is hurting the sentiment of US consumers. Elections are also going to be held in the country, which is impacting the sales of diamonds. There is no good news overall in the market,” said Colin Shah, managing director, Kama Jewelry.
He said the demand situation in the US will not improve for the entire 2024.
At the same time, the Israel-Hamas and Russia-Ukraine wars have spurred demand for plain gold jewellery.
“Gold has become a safe haven asset now. Also, Indian jewellers are reaping the benefits of the Comprehensive Economic Partnership Agreement with the UAE, leading to a surge in exports,” said Vipul Shah of GJEPC.
