"The U.S. middle class jewellery buyer is toast -- he doesn't have the money. He is living off pay checks," Rapaport said in a telephone interview.

However, at the top end of the market, demand for the rarest diamonds is surging as the number of multi-millionaires rises, especially in commodity-rich emerging markets such as the Gulf, oil-producing South American countries, Russia and east Europe.

"Demand for big stones is going up consistently," Rapaport said. "These prices are no longer speculative. They have been accepted by the market. The weakness of the dollar created a situation where the cost of diamonds in euros went down."

But Rapaport doesn't see the rally in prices of top tier diamonds running out of steam soon.

"The bubble is years away from bursting," he said.

"Diamond prices are getting very high. Diamond prices can go down, like gold," he added.

Gold prices have slipped from recent record highs as the dollar has strengthened. Gold typically benefits from a softer dollar, as it is bought as a hedge against currency weakness.

While prices of wholesale polished diamonds traded among dealers has soared, the auction house market has achieved record prices per carat, as the super-rich appear to have an insatiable appetite for the rarest gemstones as a status symbol.

Billionaire Laurence Graff, who has a store on Bond Street in London and in many other chic spots around the world, regularly appears at magnificent jewellery auctions and snaps up diamonds at ever more dazzling prices. At a Sotheby's auction in Geneva in May, he bought a pear-shaped 3.73-carat blue diamond for 5.2 million Swiss francs ($4.93 million), setting a record per carat for any gemstone.

The wives and girlfriends of the world's wealthiest people are piling on the pressure.

"The higher the price, the more she wants the diamonds," Rapaport said. "The fact that there are very hard to get, makes them more desirable."

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