Global polished diamond prices rose solidly in March, 2007, both on a month-over-month basis and on a year-over-year basis, according to the IDEX Online’s Polished Diamond Price Index.  Prices for polished diamonds increased at an accelerating rate in March, with a surge in prices occurring late in the month.  This indicates that demand is strong and pipeline inventories may be declining modestly. 

 

March vs February +0.2 percent 

For the month of March 2007, average global polished diamond prices rose 0.2 percent over average polished diamond prices for the month of February 2007.  The IDEX Online Polished Diamond Price Index, calculated on the daily averages for the month, rose to 111.01 from the prior month’s average of 110.78.  On a daily basis, polished diamond prices opened the month at 110.91 and closed the month at 111.87, after peaking briefly at 112.08.  Thus, the IDEX Online Polished Diamond Price Index surged by nearly 0.9 percent between the beginning of the month and the end of the month.  On an annualized basis, average polished diamond prices were up 2.5 percent during the month. 

 
March 2007 vs March 2006 +1.0 percent 

On a year-over-year basis, average global polished diamond prices rose 1.0 percent over the same month a year ago.  The IDEX Online Polished Diamond Price Index rose to 111.01 from 109.93 in March of the prior year.  Year-over-year polished diamond price increases have accelerated for the past four months. 

 

Polished diamond price increases have not been broad-based across all sizes and quality levels.  Continuing a trend of the past several quarters, larger, better quality gemstones have shown the largest price increases while prices for smaller diamonds declined modestly.  Luxury consumers around the world continue to trade up, and their demand for better quality goods is reflected in the prices of the more scarce, high quality, large stones. 

 

Diamond Price Increases Larger in March

For the past four months, global polished diamond prices have risen at an accelerating rate.  On both a year-over-year basis and a month-over-month basis, the upturn in diamond prices occurred in December 2006.  Since then, price increases have accelerated on a year-over-year basis.  On a month-over-month basis, there has been some volatility in diamond prices, though the trend clearly indicates that prices are strengthening. 

 

The graph below summarizes the IDEX Online Polished Diamond Price Index since the beginning of 2005 through March 2007.  As the graph illustrates, global polished diamond prices are moving upward, after languishing for most of 2006.

 

IDEX Polished Diamond Price Index 2005 - 2007 Source:  IDEX Online Research

During the first three weeks of March, polished diamond prices held steady, but late in the month, trading volume picked up and prices spiked by nearly 1 percent versus the average of the first three weeks.  Prices held firmly in the final days of the month, a trend that is continuing into April. 

 

Three factors may be largely responsible for solidifying polished diamond prices:  1) strengthening demand as jewelers replenish their stocks after the holiday selling season; 2) a better balance between supply and demand as overstuffed pipeline inventories are cleared out; and, 3) a reduced rough diamond supply, largely due to a more modest supply of rough diamonds from the DTC, the sales arm of diamond supplier De Beers. 

 

The graph below illustrates the percentage change in global polished diamond prices on a month-over-month basis since the beginning of 2006.  Comparisons are based on monthly average prices for all polished diamonds, with the percentage change based on the each month versus the immediate prior month (eg. March 2007 versus February 2007).  
 

Polished Diamond Price Trends Percent Change Month-to-Month Source: IDEX Online

The graph below illustrates the percentage change in average monthly global polished diamond prices on a year-over-year basis.  Comparisons are based on monthly prices versus monthly prices in the same month a year ago (eg. March 2007 versus March 2006).  This comparison takes into account the seasonality of polished diamond demand.   

Polished Diamond Price Trends Percent Change Year-to-Year Source: IDEX Online

Large Stone Prices Up Sharply
Continuing the trend of the past several quarters, prices for large, better-quality polished diamond gemstones continue to rise sharply.  On the other hand, prices for smaller diamonds have continued to retreat. 

 

The graph below illustrates the price action during March 2007 of selected diamonds by size.  These price comparisons are based on month-to-month price changes between March versus February 2007.  Total sales volume for the six polished diamond sizes shown represent nearly one-third of the industry’s annual sales volume.   

Polished Diamond Price Trends by Size Average Price - March 2007 vs February 2007 % Change Year-over-Year These Six Sizes = 30% of the Market   Source:  IDEX Online

The graph below illustrates price changes for the same six key diamond sizes on a year-over-year basis – March 2007 versus March 2006.  This graph reflects the same broad-based trends as the month-to-month graph above.

Polished Diamond Price Trends by Size Average Price - March 2007 vs March 2006 % Change Year-over-Year These Six Sizes = 30% of the Market Source:  IDEX Online

Diamond Price Outlook:  Demand Dynamics Cloudy

There is a high correlation between diamond demand and economic vitality.  When global economic growth is robust, diamond demand is strong.  When the global economy begins to soften, diamond and jewelry demand usually contract.  Most economic forecasters are calling for a slowing of the global economy in 2007, though forecasts have recently been revised to suggest that the slowdown will not be as pronounced as prognosticators had originally projected.  At this point, diamond prices are running counter to economic trends.  However, history tells us that diamond prices are more likely to soften later this year, with a recovery projected to 2008. 

 

The IDEX Online Diamond Price Index

The IDEX Online Diamond Price Index is a real-time index derived from actual asking prices in the global diamond industry.  The IDEX Online Diamond Price Index objectively reflects price trends as they happen.  The Diamond Index and Diamond Drivers were formulated following comprehensive research and analysis of the IDEX inventory database, aggregated since 2001.  Research and development were conducted in cooperation with Dr. Avi Wohl, Senior Lecturer of Finance at the Faculty of Management, Tel Aviv University, Israel.

 

Additional information is available from IDEX Online Research. The e-mail address is diamondprices at idexonline.com.