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WORLDWIDE PHENOMENON : This trend of turning away from gold is not restricted to India alone. Writing in the Alchemist, a publication of the London Bullion Market Association (LBMA), Neil Meader of Gold Field Mineral Services (GFMS) say that in Italy, from a peak in 1992, gold jewellery consumption fell by 58 per cent by 2005. The decline was linear, being hardly deflected by the drop in Euro gold prices in the second half of the 1990s. during this period, GDP grew 18 per cent in real terms!
According to Meader, there is a two-part explanation for the changes in taste of the Italian consumer. First, there are long term societal shifts such as women leaving the home and earning their own salary. Secondly in the shorter term, there are more fashion oriented changes such as last seasons taste for the semi-gothic or the appearance of the mono-stiletto earring in the spring/ summer 2006 fashion collections. He also reports a swing away from plain metal - both gold and silver - to gem - set jewellery, particularly diamonds. While heavy producer promotions could account for the popularity of diamond jewellery, there was no such boost for other coloured gemstones and pearls - and yet they have shown very strong growth.
However, Meader says one of the most important longer term issues has been 'consumers choosing to devote an ever-greater percentage of their disposable income to goods other than jewellery. One of the most important competitors is technology goods (in particular mobile phones), an area that benefits from heavy promotion'.

It isn't just gold alone that has seen prices soar. Silver is now experiencing a surge in industrial demand that has pushed prices up sharply.

This had led to a consumer reluctance to switch to silver jewellery as once again the investment value and loss in making charges make it preferable to buy bullion instead of silver jewellery.
The recent releas of several tons of silver by the Government of India has however, stabilized the market somewhat dampening the price spike that was developing. Many of the illegal import - export transactions that were based on rice differentials between the Indian and international markets have also been sharply reduced. But silver prices continue to be high internationally and thus dampen the chances for any substantial growth in silver jewellery consumption.

The overall impact of high gold prices on the Indian jewellery market is to make it sharply more aware of the value of design as compared to simply intrinsic value.

However, the need to buy something 'precious' coupled with successful De Beers campaigns in the country have sharply increased the sales of diamond jewellery in India. having begun as a mainly urban phenomenon, this trend this now spreading throughout the country and the future for diamond jewellery looks good with several regional markets now beginning to trade up in the quality of diamonds demand.

Apart from the certainty of substantially higher prices by year's end, gold continues to generate a great deal of uncertainty - the worst thing possible for jewellery markets anywhere.