But even as China’s consumer diamond market – the world’s second-largest – has been losing its lustre, the nation’s appetite for gold has been insatiable. The diverging trends can be seen as a response to the country’s economic troubles. Analysts point out that, in times of uncertainty and shrinking wallets, people look to gold as a haven to store their wealth, and they cut back on discretionary purchases like diamonds.

“Chinese consumers are looking for ways to preserve their wealth amid weaker confidence,” said Gary Ng, a senior economist at French bank Natixis. “Gold carries the dual nature of consumption and investment, and it has better liquidity when reselling and more transparent prices than diamonds.”

Mainland China, buoyed by years of rapid economic growth, went from representing just 1.5 per cent of the world’s diamond-jewellery market in 2000 to 13.4 per cent by 2014, according to a report released in August by diamond giant De Beers. After that boom, the proportion remained relatively flat through 2019. And by the end of the pandemic in 2022, China’s global share had dropped to 10.2 per cent.

Between 2021 and 2022, an 11.2 per cent drop in diamond sales in China marked the biggest decline among all major global markets that De Beers surveyed.

Highly unusual volatility in global diamond demand over the last four years might have impacted consumer sentiment towards diamonds, “especially relative to gold, which has been a lot less volatile”, said Paul Zimnisky, a New York-based independent diamond analyst.

He agreed that China has been underperforming other major markets. By his estimates, the diamond market comprising mainland China, Hong Kong, Macau and Taiwan dropped from US$13.7 billion in 2021 to US$12.8 billion in 2023.

“Given the current heightened economic uncertainty, it is understandable why gold has been favoured by Chinese consumers as of late,” Zimnisky said.

Lab-grown diamonds were also eating into the market share of their mined counterparts, said Lai Ming Yii, a research manager at Daxue Consulting in Shanghai.

“This affordability is particularly attractive to younger consumers who are price-sensitive but still desire quality and status symbols,” she said, adding that newlyweds were also opting for substitutes to diamond engagement rings with a higher investment value.

In contrast, gold appeals to cautious investors as “a safe-haven asset amid economic volatility and geopolitical tensions”, Lai said, adding that consumers might also be enticed by frequent offers on gold at prominent jewellers.

Chinese consumers bought 308.9 tonnes of the precious metal in the first quarter of this year – a 5.9 per cent increase compared with the same period in 2023, according to data released by the China Gold Association last month. The price of gold was US$2,377 an ounce as of Friday, according to the London-based World Gold Council.

Globally, central banks, including China’s, have also been increasing their gold holdings to hedge against geopolitical risks and market volatility, said Natixis’ Ng, adding that he expected the trend to continue.

The People’s Bank of China continued its buying spree in April, with the country’s official gold reserves rising for an 18th consecutive month. Its holdings grew by 16 per cent in the last year-and-a-half alone and stand at 2,264 tonnes, according to the World Gold Council.

The divergence is being felt at jewellery retailers, where gold has been making up for underwhelming diamond sales.

At Luk Fook, a Hong Kong-headquartered company with a strong mainland presence, revenue for its wholesale business – largely driven by diamond sales – fell 21.4 per cent in 2023, year on year. The company said in its annual report earlier this year that it would “actively promote” fixed-price gold products to make up for the shortfall.

It was a similar story at Chow Sang Sang, which said in its annual report that diamond jewellery sales, especially for higher price bands, were “on a downward trend in mainland China”, but same-store sales growth rose by 21 per cent in 2023 on the back of demand for gold.

Other companies have not been so lucky. Chinese diamond ring brand I Do filed for bankruptcy restructuring in January 2023, and the Shenzhen-listed DR Corporation, which owns the Darry Ring brand, saw its profits plunge in the first half of last year.

A diamond salesman who entered the industry just two years ago told state-owned Phoenix Media that his team used to make about 1 million yuan (US$138,000) a year from sales, with about 150 enquiries a month that would yield around 20-30 orders. By mid-2023, the enquiries had plummeted 20-30 a month, with only occasional orders.

But some are still betting that diamonds might be forever.

American diamond specialist Harry Winston opened its eighth Chinese store in Hangzhou in February, while De Beers – despite acknowledging China’s challenging macroeconomic climate – maintained there were “encouraging prospects for diamond jewellery sales” in its report, citing enduring demand from China’s ultra-rich, along with untapped markets in lower-tier cities.

China’s luxury jewellery sales grew by 17 per cent in 2023, year on year, according to an April report by PwC China, with the professional services firm identifying it as one of several “high potential” segments in the personal luxury market.

“I believe that China [and] India remain the diamond and jewellery industry’s most exciting markets,” said Zimnisky, citing their massive populations and fast-growing middle classes.

“Jewellery demand is highly correlated to the health of the economy,” he added. “So, of course, there will be ups and downs, but the overall longer-term trend remains favourable.”