(IDEX Online News) - Worldwide polished diamond prices rose significantly in November, according to the IDEX Online Global Polished Price Index. At the beginning of the month, the IDEX Online Index stood at 117.1. By the end of the month, it stood at 118.5, an increase of 1.2 percent. This would equate to an annualized 14 percent price increase.

 

Several factors drove higher prices, including the following:

 

·        October jewelry sales in the U.S. showed a solid recovery from lackluster demand in the late summer period. An improving stock market and a bottoming real estate market were responsible for a rising consumer wealth factor. When consumers feel wealthy, they increase their discretionary spending.

 

·        U.S. consumers began their holiday shopping earlier this year. While the economic recovery has been slow, the economy is clearly improving. As a result, consumers appear to have breathed a sigh of relief and loosened their purse strings.

 

·        The holidays in the Indian market are over, and traders are buying goods.

 

·        The overall mood has improved in the diamond industry throughout the entire distribution pipeline. Emboldened diamantaires have begun to raise polished diamond prices.

 

The IDEX Online Global Polished Price Index averaged 117.9 for the month of November, barely up from an average of 117.8 for October. However, the “average” obscured daily trends, as the graph below illustrates. The IDEX Online Index reached 118.5 in early September (peak at left on graph below), then fell for the balance of September and October, and began rising in early November, as this three-month daily price summary shows.

 

Source: IDEX Online

 

Outlook More Rosy

Last month, IDEX Online Research was bearish on diamond prices, especially after weak jewelry sales during September in the U.S. market.

 

It now appears that consumers are in the malls, and holiday selling season sales will be up – though modestly – from last year. Further, early indicators suggest that jewelry is on consumers’ shopping lists.

 

Capitalism sets prices based on supply and demand. Now that demand for jewelry – and perhaps diamond jewelry – is strengthening, diamond prices will likely trend higher.

 

However, it is clear that we are still in the recovery phase of the current economic cycle. As a result, demand will be choppy for the next several months. Thus, we could see short-term swings in demand that might obscure the long term potential for higher diamond prices.

 

The graph below illustrates that diamond prices are recovering, even though there may be daily or weekly swings that are unfavorable.

Source: IDEX Online

The full analysis of the polished diamond prices is available to IDEX Online Research subscribers and IDEX Online members here. Click here for more information on how to subscribe or become a member.