Investment diamond prices saw a significant increase in the first quarter of 2011, up 7 per cent in March and 13 per cent for the period.

According to Fusion Alternatives, the strong holiday season allowed investment diamond prices to break resistance levels over the quarter, moving them closer to their pre-financial crisis levels of Q2 2008. The recent De Beers event in March also signified a return to positive times, after the company increased its rough diamond prices by as much as 10 per cent on a relatively large estimated sight value of $500 million.

"The global diamond market is strong and we expect polished diamond prices to continue to trend upwards in Q2. We are seeing increased speculative trading activity in inter-dealer markets as the market adjusts to the continued surge," said Saul Singer, chief investment officer of Fusion Alternatives.

Rough diamond prices have gone up by as much as 40 per cent over the last year, the company said, but polished prices have only started responding moderately over the last two months. The time lag between rough and polished price movements can be as much as six to nine months, the firm added.