(IDEX Online News) – Polished diamond prices strengthened significantly in February 2010, according to the IDEX Online Polished Diamond Price Index. At the end of the month, polished diamond prices were within 4 percent of their all-time high reached in August 2008, just as the recession hit the jewelry industry with the force of a major tsunami.

 

Here are the relevant statistics about global polished diamond prices for the month of February 2011, based on the IDEX Online Polished Diamond Price Index:

 

·         Between February 1 and February 28, polished diamond prices rose by about 2.9 percent, the steepest increase since the price recovery cycle began near the end of the first quarter of 2010.

 

·         On a month-to-month basis – February 2011 versus January 2011 – polished diamond prices rose by 1.5 percent, based on average asking prices for both months. This was one of the largest monthly price increases in the past year.

 

·         On a year-to-year basis – February 2011 versus February 2010 – polished diamond prices rose by 8.5 percent. This price increase was in line with monthly year-to-year prices increases since mid-2010.

 

Polished diamond prices have been driven higher by several factors:

 

·         Consumer demand for diamond jewelry has shown a remarkable recovery in the past few months. Retailers have been able to implement price increases without encountering consumer resistance.

 

o   In the U.S., jewelry sales have shown a solid, consistent rebound throughout most of 2010, with intensifying demand during the all-important holiday selling season of November-December 2010.

 

o   In China, diamond demand has been showing consistent growth.

 

o   In India, demand for smaller diamonds has been especially strong. This showed up in the sharply stronger demand trends for one-carat diamonds, which were posted in February.

 

·         Diamantaires have raised prices in an effort to recover financially from the devastating impact of the long and deep recession that hurt the diamond and jewelry industry.

 

·         There is much optimism about diamond demand in anticipation of the upcoming Hong Kong jewelry show as well as other global jewelry shows later this spring.

 

·         Rough diamond prices have been rising rapidly. At the February DTC sight, rough diamond prices were up an average of 7 percent, with some sizes posting even greater price increases. BHP’s rough diamond prices have also been rising. As rough diamond prices rise, polished diamond prices will also increase, though there is often a lag.

 

The graph below summarizes polished diamond price trends over the past two years, based on the IDEX Online Polished Diamond Price Index.

 

Source: IDEX Online

 

Polished Diamond Prices Rose Consistently Throughout February

The lowest diamond prices during February occurred on the first day of the month, and the highest prices occurred on the final day – February 28. With only two brief pauses, polished diamond prices rose consistently during the month, as the graph below illustrates.

 

Source: IDEX Online

  

At the end of February, the IDEX Online Polished Price Index stood at 124.5. On March 1, it jumped to 124.8, and it appears to be energized to move even higher. The IDEX Online Index peaked at a record 128.9 during August 2008, just as the global economic bubble was bursting.

 

Month-to-Month Polished Diamond Prices Strong

When polished diamond prices are compared between February 2011 and January 2011 – based on the average price for the month – prices rose by a very strong 1.5 percent. This was one of the largest price increases in the past twelve months, as the graph below illustrates.

 

Source: IDEX Online

 

On an annualized basis, the February month-to-month price increase would be about 18 percent. Clearly, this is not sustainable.

 

Year-to-Year Polished Diamond Prices Up Solidly

Polished diamond prices in February rose by 8.5 percent from the same month a year ago. Year-to-year comparisons are important because they take the seasonality out of diamond demand trends. In addition, they provide a longer-term view of trends, which are usually less volatile than month-to-month comparisons.

 

The graph below shows that February’s polished diamond price increase of 8.5 percent is about in line with the past six months’ gains. This suggests that prices in the early phase of the recovery are rising at about double or triple the long-term growth rate of polished diamond prices – in the 2-4 percent range annually.

 

Source: IDEX Online

 

Prices Up for All Sizes of Polished Diamonds

Prices rose in February for all of the key sizes of diamonds, with some price increases larger than others. It is no surprise that prices of large stones – four- and five-carat diamonds – rose much faster than some other smaller sizes. The market is finally strengthening for larger stones; previously, consumers were opting for smaller stones during the recession.

 

We also note that demand for one-carat stones has been strong. This demand is coming from several regions around the world, as mass market consumers are coming back into the market.

 

The graph below shows polished diamond price trends on a month-to-month basis for key diamond sizes. 

 

Source: IDEX Online

 

Polished diamond prices were up most strongly for larger sizes – three-carat and above – on a year-to-year comparison. The largest price increase occurred for three-carat stones: up 24 percent between February 2010 and February 2011, as the graph below illustrates.

 

Source: IDEX Online

 

The graph below summarizes three years of prices for key polished diamond gemstone sizes and qualities. After being relatively flat for more than a year, prices are finally beginning to edge upward.

 

Source: IDEX Online

 

Outlook: Prices Headed Higher

There are a number of positive factors – and few negative factors – that are affecting polished diamond prices in the current market. As a result, we expect prices of polished diamonds to continue to rise.

 

We expect to see moderating price inflation later in 2011, as demand returns to more normal levels. Longer term, we’d expect to see polished diamond prices rise by 3-4 percent annually.

 

The table below summarizes the average price of polished diamonds, using the IDEX Online Polished Diamond Price Index. The peak for diamond prices occurred in August 2008. Since prices began recovering about a year ago, the IDEX Online Index has trended solidly upward. At the end of February, it was within about 4 percent of the record peak level achieved in August 2008. It is highly likely that polished diamond prices will set new records later this year.

 

Source: IDEX Online