There is a lot of talk about how the rise of outsourced labor from China and India is resulting in a loss of jobs in the United States. However, not that many people take into account the addition of new consumers to the global economy. This can impact the demand of popular goods and cause markets in certain commodities to climb, like diamonds and gold. In fact, we are recently seeing just such a trend as the new source of income in these countries tips the scale and begins to produce wealthier citizens with more money to spend overseas. And what are they choosing to spend their new wealth on? Diamonds and gold appear to be a favorite! Jewelry sales, along with diamond and gold commodities, are climbing, as noted by analysts in the popular media.
The Rise of Chinese and Indian Middle Class
As capitalistic methods have changed global markets, they have impacted the disparity between the low and high income classes of society in these emerging countries. This has resulted in the appearance of the iconic American middle class in the social structures of places like India and China. With this new demographic and increase in social wealth, we have a new class of consumers willing to find ways to increase their capital, spend it, or conserve it in the form of cultural investments of wealth. Oftentimes, they will turn to whatever appears to be socially acceptable within their own cultural traditions as well as what is perceived or noted to be rising in price over the long-term.
Cultural Status Symbols
In the Indian and Chinese culture, gold jewelry and precious stones have always had a high status and been traditionally used to either display wealth or convert it to a commodity that can be traded or sold. Whereas Americans don’t usually consider jewelry items a form of investment, other cultures still see these items as marketable commodities either due to cultural associations or demand within their own countries. They are used in religious and social ceremonies, especially in weddings, and are highly valued within the cultures. They are also deemed highly portable forms of wealth. If the commodity has a social as well as a global wealth status, it makes a highly desirable form of investment for people in that culture.
The Supply of Diamonds
Many diamonds mines are becoming depleted of their high-quality gemstones suitable for fine jewelry. Other types of diamonds, like the pink ones, are rising in demand but the supply is naturally limited to certain geographical areas. As these trends continue, they become even more distinct when additional consumers from China and India also are demanding more diamonds and gold from the world market. This additional demand affects the supply of certain types of fine jewelry diamonds which become relatively scarce, and their value continues to rise as the demand increases. We can expect to see more of this type of dynamic as the supply of fine gold and diamond jewelry becomes scarcer and the demand continues to increase. For this reason, you can expect gold and diamonds to make a fine investment now and in the future within the global economic marketplace.
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