Wealthy Russians are increasingly turning to investment-grade diamonds, with purchases of polished stones rising by 60% last year, according to VTB, the country’s second-largest bank. This surge in demand is attributed to the government’s decision to abolish VAT on diamond purchases, which has made gemstones a more attractive investment option.

Oksana Semenenko, vice president at VTB and head of its private banking division, explained that the rarity and uniqueness of diamonds make them especially appealing during times of rising financial market instability and tighter investment restrictions. Many affluent clients are now incorporating alternative investments, including diamonds, into their portfolios, typically allocating 5-10% of their assets to these tangible assets for diversification.

This shift comes amid increasing sanctions from the G7 and restrictions on Russian currency, which have impacted Russian diamond exports. In response, Alrosa, the state-run diamond mining giant, is turning to alternative markets to sell its goods. The company’s Diamond Exclusive program focuses on polishing its largest and highest-quality diamonds, particularly stones of 3 carats or more, to be sold directly to investors through partnerships with VTB and other financial institutions.

Rio Tinto’s diamond revenue for 2024 fell by 37% to $279 million, largely driven by difficulties at its Diavik mine in Canada and the broader downturn in the diamond market. The company reported a loss of $127 million for the diamond segment, a sharp contrast to the previous year’s underlying earnings of $26 million. Despite the tough market conditions, Rio Tinto reaffirmed its focus on responsible sourcing and operational efficiency as key priorities moving forward.

The year was further marked by a tragic incident at the Diavik mine, where several team members were among the victims of a plane crash in January. This added to the operational challenges faced by the company during an already difficult period. Despite these setbacks, Rio Tinto has emphasized its commitment to managing the operation responsibly and efficiently, as it navigates the ongoing industry challenges.

With a challenging market outlook and operational difficulties, Rio Tinto continues to focus on adapting to market conditions while upholding its dedication to sustainable and ethical practices in diamond mining.

Indian consumers are seizing the opportunity to purchase natural diamonds as prices have fallen by around 30%, dropping from ₹5 lakh per carat in 2022 to ₹3.5 lakh. This price drop has sparked a wave of demand, especially as the cost of gold and silver continues to rise. With consumers increasingly turning to diamonds as an investment, the market for natural diamonds is seeing a notable rebound.

Globally, the rising popularity of lab-grown diamonds in the US and reduced purchases from China are contributing to the price fluctuations. Despite these trends, Indian jewellery manufacturers are adjusting to the higher demand for diamond-studded jewellery, meeting the needs of consumers eager to capitalize on the price drop. As the market shifts, the dynamics of diamond buying are changing rapidly in the face of global economic factors.