Diamond prices are on the rise and are expected to outpace gold in the coming years, a result of increased luxury goods spending in China, the Middle East, and India. A rising middle class population in China and India that will be able to afford diamonds is expected to cause a global demand for diamonds that will outpace supplies. By 2015, the two nations are expected to account for about 40% of global diamond demand (compared with 8% in 2005).

Harry Winston Diamond Corporation plans on opening a jewelry salon in Shanghai for its Chinese consumer base—its biggest jewelry salon in the world. Demand for polished diamonds in the United States, however, is expected to grow at a much lower, single-digit rate over the coming decade.

“We expect emerging nations, first and foremost India and China, to drive the demand for diamonds in the upcoming years, while consumption of developed nations is likely to moderate somewhat,” said Finam Investment analyst Vladimir Sergievskiy.  “On the supply side, the commissioning of new mines should be largely offset by depletion of matured ones.”

According to market analysts, the average price of rough diamonds is expected to rise by 9% in 2012 to about $145 per carat. Rough diamonds forecasts from 2012-2016 show a rise in value each year. Prices of top-quality diamonds also rose significantly this year.

Despite having made significant gains in the past years, gold is expected to decline starting in 2013.

“The current gold price doesn’t reflect the underlying supply and demand fundamentals…. It much more reflects an artificial demand for gold as a hedge and as a store of value against inflation. That means the market is prone to a pretty substantial correction sometime in the future,” said Rob Henderson, chief economist at National Australia Bank Ltd.