Kolkata: The fact that people are opting for diamonds as gold prices are skyrocketing has actually kept interest in the yellow metal alive -- to an extent.

"Gradually, diamond sales in India are increasing due to volatile gold prices," said Pankaj Parekh, regional chairman of the Gem and Jewellery Exports Promotion Council.

"Around 25 percent of people who purchase gold for social gifting have drifted to diamond," Parekh said.

Ironically, this is exactly why gold -- though of lesser purity -- is also getting sold.

"Diamonds are set on 18-carat gold instead of 22-carat gold with which gold ornaments are usually made. On a diamond-studded ornament, the gold used is of lesser purity and of lower price."

Concurred Anarghya Choudhury, director of city-based Anjali Jewellers.

"We expect strong sales (of gold ornaments) because it is the festival season and the marriage season will soon follow, and in India we buy gold on these occasions," Choudhury said.

The spectacular rise in diamond sales, especially after certified diamonds came into the market, would also help push sales of gold jewellery.

"Diamond is helping in selling gold as it is studded on jewellery."

Echoed Sandeep Khulhali, vice-president of branded gold jewellery seller Tanishq: "Diamond sales are very healthy, about 30-35 percent more than last year."

But, overall, according to professionals in the trade, though sellers of gold would likely earn more than last Diwali -- given the higher price of the metal -- volumes sold were likely to dip.

Gold price has more than doubled in the past four years and is now hovering around Rs.16,000 per 10 grams. It was between Rs.12,000 and Rs.14,000 around this time last year.

Parekh said companies would earn higher revenues this year from gold sales. "After all, the metal has a different charm and flaunting factor. But volume-wise sales are going to suffer."

Khulhali of Tanishq, the jewellery business arm of the Tata group-promoted Titan Industries, felt the same. "Though gold sales have picked up compared to last year, volumes may dip."

World Gold Council data seems to bolster this view. According to it, total demand in the country plunged 83 percent to about 18 tonnes in the first quarter, as compared to 107 tonnes registered in the corresponding period last year. India is the world's largest gold market.

The Bombay Bullion Association says sales fell 54 percent between January and June this year after demand from both buyers and jewellers cooled with the decline in the rupee pushing up gold prices.

According to Parekh, people who earlier bought gold as investment were now moving on to buying gold exchange traded funds.

"Erratic price movement is also preventing jewellery sellers from buying gold in bulk," he added.

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