Eurostar’s Mehta attributed the rising prices to shortage of rough in the market and lower production of polished in the manufacturing centre of Surat, which he says is still facing a labour shortage.

Antwerp-based Dinesh Narula of xxxx confirmed this view commenting, “The market is very hot right now. Prices are going up continuously, and the rough shortage in the market will mean that they go up even more in the coming months.” Narula was happy that polished prices were also moving. “That is a good sign,” he said, adding, “The Asian markets are moving very well and fast; the US has also picked up; hence, for the star and -2 categories the prices are very strong.”

Sounding a note of caution however, Narula stressed, “The prices should stabilise here. We need to also keep in mind the consumer market. People’s pockets are not changing and they may not accept such a rise in the finished jewellery product.”

There are some in the trade who feel that the high prices of rough reflect a speculative tendency. In the past there has been much concern about speculation in the trade and the negative impact it could have on the industry as a whole.

However industry analysts point out that the current situation may not be the outcome of such factors in the main, but rather the result of the fundamental situation in the business. The supply-demand equation is clearly weighted in favour of demand. Both rough supply and polished production have remained at lower levels than in the pre-2008 period. De Beers estimates that in 2010 the Indian diamond market grew by 31% while China grew by 25%, and the US market fared much better than expected. Overall diamond demand, the company estimates, rose by 8% in 2010. It is optimistic about growth in the two Asian countries this year as well.

Most forecasters and analysts feel it is safe to assume that prices will continue to rise, with minor ups and downs – at the very least they will continue to hold, unless some unforeseen circumstances arise.