The polished diamond industry appears to have its own measure of diamantaires’ confidence: the IDEX Online Polished Diamond Price Index. While the goal of the IDEX Online Index is to track the price of polished diamonds, it also appears to reflect diamantaires’ outlook and confidence in future demand.

 

Like any good merchant, when diamantaires expect demand to increase, they implement price increases. This is what happened ahead of the two shows in June – JCK Las Vegas and Hong Kong. As diamond merchants collected goods in the market ahead of the shows, prices started to inch up.

 

However, demand at the shows did not materialize as strongly as expected and as a result, polished diamond prices eased after the shows. For the month of July, the IDEX Online Global Polished Diamond Price Index stood at 117.4, barely up from June’s 117.2.

 

However, this comparison with June is somewhat misleading. In fact, polished diamond prices in July did not show any significant movement during the month. The IDEX Online Polished Price Index started the month at about 117.4 during the first few days, and it ended the month at the same average level for the final few days: 117.4. For the full month, the Index averaged 117.4.

 

Long Term Price Trend Remains Positive

After bottoming in mid-2009 at around 108, the IDEX Online Global Polished Price Index has risen almost every month since late last year. The graph below summarizes the diamond price index by month for the past two years. As the graph illustrates, prices have risen at a steady, consistent level, with only a pause in July. We believe that this indicates that fundamental underlying demand is responsible for most of the price gains, though some diamantaires raised prices based on their confidence in the prospects for future demand.

 

Despite the pause in upward price movement in July, we continue to believe that polished diamond prices are headed higher over the next twelve months.

 

Source: IDEX Online

 

Month-to-Month Polished Diamond Prices Relatively Flat in July

The IDEX Online Global Polished Price Index averaged 117.4 for July 2010, a modest 0.1 percent increase over June’s average of 117.2. The graph below illustrates that July’s prices paused, after a seven-month run of price increases.  

 

Source: IDEX Online

 

Year-to-Year Polished Diamond Prices Up Sharply

The IDEX Online Global Polished Price Index for July 2010 – 117.4 – was a solid 7.8 percent higher than the average for July 2009, as the graph below illustrates. July was the sixth consecutive month that prices have risen on a year-to-year basis.

 

Source: IDEX Online

 

Prices Recover for Larger Diamonds

During July, the month-to-month price of two- and three-carat stones posted a gain, with three-carat stone prices up nearly 2 percent versus the average of their June 2010 prices.

 

The graph below illustrates the strength in prices of two-and-three carat diamonds in July, when compared to the prior month. Month-to-month prices of other size diamonds declined. We note that in June, four-carat stones spiked in price by over 5 percent on a month-to-month basis (versus May 2010), but pulled back modestly in July.

  

Source: IDEX Online

 

On the other hand, year-to-year prices of large stones – four and five carat diamonds – have shown a much more modest price increase than smaller stones, as the graph below illustrates. This is the result of uneven price declines last year: smaller stone sizes fell first, followed by larger stone prices later in the cycle.

 

“Snapshot” graphs of a single month are less meaningful than overall trends; diamantaires should look at the longer term movement of the IDEX Online Global Polished Diamond Price Index which illustrates that polished diamond prices are moving broadly higher, despite the pause in July.

 

Source: IDEX Online

 

The graph below summarizes three years of price movement of polished diamonds by various key sizes.

 

Source: IDEX Online

 

IDEX Online Index Summary Table

The table below summarizes the IDEX Online Index by month for the past three years.

 

Source: IDEX Online

 

Outlook: Polished Diamond Prices Will Continue to Rise

We strongly believe that polished diamond prices will continue to rise from current levels, though there could be month-to-month plateaus. Not only is there solid fundamental demand from shoppers, but rough diamond prices have also risen earlier this year.

 

With pricing pressure coming from both ends of the diamond pipeline, prices in the middle have no way to go but up.