IDEX Online Research: December Polished Diamond Prices Solidify
January 06, 10
For the first time since April 2009, there was some trading energy fueling polished diamond prices. While the IDEX Online Polished Diamond Price Index rose only 0.4 percent for the month of December versus November, the IDEX Online trading platform reflected both increased optimism and solidifying prices.
· Polished diamond prices appeared to firm up during December 2009.
· After eight months of languishing prices, it appears that demand for polished diamonds is poised to intensify further. Diamond jewelry sales during the all-important holiday selling season – especially in the American market – were better than anticipated.
· With inventories low, the entire diamond pipeline – especially retailers – could be on the verge of re-stocking goods because of improving demand and a recovering economy.
· Three carat stones and smaller posted solid month-to-month gains. In contrast, larger diamonds – four carat and higher – fell in price in December versus November. This confirms retailers’ reports that smaller, lower-cost diamonds are selling better than larger, high-cost stones.
· Diamantaires are talking about near and long term prospects for diamond demand in new markets, especially India and China. If this “talk” becomes loud enough, and if the American market continues to rebound, polished prices are headed higher in 2010 and beyond.
The graph below summarizes overall polished diamond price trends for the past two years.
 Source: IDEX Online |
The table below summarizes three years of the IDEX Online Polished Diamond Price Index by month.
 Source: IDEX Online |
Month-to-Month Polished Price Trends:
December 2009 versus November 2009: Up 0.4 percent
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After languishing for the past eight months, polished diamond prices finally showed some life. Polished diamond prices rose in December 2009 by 0.4 percent from their average level in November 2009. For the first time since early 2009, polished prices showed a price gain that we can call “statistically significant.”
The IDEX Online Polished Diamond Price Index averaged 109.22 in December, up from November’s 108.73. While it is hard to argue that this price increase is notable, it was enough “to move the needle.” Further, the IDEX Online diamond trading platform reflects increased trading levels and a generally higher level of optimism than in earlier months of the year.
At the beginning of the month, the IDEX Online Polished Diamond Price Index stood at 109.11; by the end of the month, it was 109.29. It dipped below 109 only briefly during the month.
The graph below summarizes month-to-month changes in global diamond prices for the past thirteen months. Diamond prices rose sharply during the early months of 2008, peaked in August 2008 and fell for about seven months. Polished prices leveled out at the beginning of the second quarter of 2009, and have remained more or less flat since then, though December reflected some upward energy.
 Source: IDEX Online |
Year-to-Year Polished Diamond Price Trends:
December 2009 versus December 2008: Down 6.4 percent
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On a year-over-year basis, global polished diamond prices dropped by 6.4 percent in December 2009 versus December 2008. It was the twelfth month that year-over-year prices dipped for polished diamonds.
However, the rate of decline has begun to slow notably; this was the first month since March 2009 when the percentage price decline was a single digit number. The percentage drop in diamond prices is expected to decline over the coming months, as diamond prices continue to recover.
It is likely that polished diamond prices will continue to reflect weakness on a year-to-year basis, at least until the end of the first quarter of 2010. After that, we expect to see diamond price inflation – positive percentage changes – for the balance of the year.
Like the global stock markets, diamond prices are poised to move higher. However, similar to the stock markets, it could take a couple of years or longer before prices reach the peak achieved in the summer of 2008.
During December, the IDEX Online Global Polished Diamond Price Index averaged 109.22, down from the 116.75 posted in December 2008.
The graph below summarizes the year-to-year deflation rate for polished diamond prices in the global market for the past thirteen months. The year-to-year comparison takes into account the seasonality of polished diamond demand and prices.
 Source: IDEX Online |
Other Key Diamond Price Comparisons
In July 2004, the IDEX Online Polished Diamond Price Index stood at 100.0. It peaked at 128.91 in August 2008. In January 2009, the Index stood at 114.68.
· Polished diamond prices have fallen about 15 percent from their peak in August 2008.
· Polished diamond prices fell by only about 5 percent during 2009. Clearly, the steepest decline in price occurred in the final months of 2008.
Day-to-Day Diamond Prices Show Slight Upward Bias in December
Diamond prices moved slightly higher in December versus the prior eight months. While the price movement was barely perceptible, it was real. Prices edged up sharply mid-December, a trend that held more or less for the balance of the month.
The graph below summarizes day-to-day polished diamond price movement during December 2009.
 Source: IDEX Online |
Polished Prices Weaker for Larger Diamonds
Market demand appears to have solidified for smaller polished diamonds – three carat and below. Those prices showed a month-to-month gain in December, while prices for four carat and larger diamonds fell in December when compared to November.
Further, on a year-to-year basis, two-carat and smaller polished diamond prices fell less – by a single-digit percentage – versus prices for three-carat and larger diamonds, which posted a double-digit price decline during December.
The graph below summarizes polished diamond price trends since the beginning of 2007 for seven key diamond sizes which represent about one-third of the total value of the polished diamond trading market.
 Source: IDEX Online |
The following table summarizes the month-to-month price changes in these seven key sizes of polished diamonds over the past three months.
The following table summarizes year-to-year price changes for the seven key diamond sizes that represent about one-third of the polished diamond trading market by value.
 Source: IDEX Online |
Forecast: Polished Diamond Prices Set to Rebound
Short of some kind of system shock, IDEX Online Research is ready to declare that we have seen the bottom for polished diamond prices. From here, prices are headed higher.
The big questions are these:
1. How high are they headed?
2. How rapidly will they rise?
We don’t have the exact answer to those questions, and we do not own any diamonds for trading purposes, but here’s a likely scenario for polished diamond prices:
· Polished diamond prices could be volatile in 2010 as the pipeline begins to restock.
· Polished diamond price inflation will likely be artificially high in 2010, as the restocking process begins.
· Over the longer term, polished diamond price inflation will likely stabilize, perhaps at or slightly above the historic annual inflation rate of 3-4 percent.
· The wild card relates to potential demand from new markets such as India and China.
Based on the American market, which currently consumes roughly half of all diamond jewelry in the world by value, demand is likely to perk up even more this year. Not only will retailers be forced to restock their empty showcases, but also they will be stocking diamonds in anticipation of stronger consumer demand.
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 Online 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,
For additional information is available from IDEX Online Research, email diamondprices@idexonline.com.