Dubai might be on the cusp of emerging as a top-tier international hub for diamond trading as India loses its shine, according to Saul Singer, a partner at Fusion Alternatives, the alternatives asset manager which specialises in investment diamonds.

One recent development in India which is threatening its status as the leading global diamond trading hub is the 2 per cent import duty on polished diamonds which the country’s finance minister imposed in January.

The move was intended to curb the practice of “round-tripping" diamonds, which was an entrenched feature of the domestic Indian diamond dealer market and which had been instrumental in a spate of high-profile bankruptcies and frauds within both the global and domestic diamond industries. Round-tripping is when diamond firms export stones and reimport them from overseas affiliates to ficticiously shore up balance sheets and increase their turnover in a bid to garner extra bank financing.

The Indian government taking decisive action with the import duty may bode well for the larger Indian diamond manufacturers, but Singer argues that it reduces the country’s attractiveness for diamond trading activities and represents a serious blow to India’s competitive advantage of assured liquidity levels.

As such, Dubai is poised to emerge as a leading diamond trading hub, not least because of the emirate’s proximity to Mumbai and Surat. Being close to these Indian diamond centres makes it easy for Indian firms to set up trading affiliates in Dubai and redirect their trading activities through there.

Off the back of this likely shift in trading activity in Dubai, Singer predicts that diamond investment activity in the gulf will trend higher as awareness is raised in broader markets, liquidity levels firm up and prices become more transparent.

Dubai’s diamond market should have a further boost from the fact that it comes under the auspices of the Dubai Multi Commodities Centre, and as such diamonds can be marketed and branded as a tradeable and investable commodity alongside other more mainstream ones like gold.  

Earlier this month Singer noted that the threat of military strikes against Iran - and the inflationary fallout which would probably result - is fuelling appetite for investment grade diamonds and that demand for very high-end investment diamonds has significantly increased in the Gulf States.

He predicted that savvy investors globally may be about to pile into investment grade diamonds, due to their current attractive valuations and positive prospects. “Investment diamond prices are down around ten per cent on the level they were at six months ago, while the overall medium-to-longer term projections point to an annual price growth rate of 12-14 per cent,” he said.

Thus far this year the global diamond trading markets have remained relatively sluggish amid uncertain market sentiment, however the start of the year has seen several diamond jewellery “firsts”. January marked the unveiling of "Tsarevana Swan" - a $1.3 million piece which made the Guinness Book of World Records for "the most diamonds set in one ring wearable on the human finger." The Baselworld exhibition was also the launchpad for a SFr70 million ($76 million) Shawish ring made entirely of diamond and a Hublot men’s watch believed to be the most expensive ever, set with 140 carats of diamonds and worth an estimated $5 million.