(IDEX Online) - Polished diamond prices rose dramatically in March 2011, according to the IDEX Online Polished Diamond Price Index. At the end of the month, polished diamond prices had slightly surpassed their previous all-time high reached in August 2008, just as the recession hit the jewelry industry head-on.

 

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

 

·         Between March 1, 2011 and March 31, 2011, polished diamond prices rose by about 3.9%, the steepest increase since the price recovery cycle began near the end of the first quarter of 2010.

 

·         On a month-to-month basis – March 2011 versus February 2011 – polished diamond prices rose by 4.9%, based on average asking prices during both months. This was the largest monthly price increase in several years.

 

·         On a year-to-year basis – March 2011 versus March 2010 – polished diamond prices rose by 12.7%. This price increase was substantially above prior year-to-year prices increases in the post-recession period.

 

Polished diamond prices have been driven higher by several factors:

 

·         Consumer demand for diamond jewelry has shown a remarkable recovery in the past several months. Retailers have generally 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. Preliminary jewelry sales during January and February 2011 confirm that these trends have continued into this year.

 

o   In China, diamond demand has been showing consistent growth, especially for smaller caratage diamond gemstones.

 

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

 

·         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.

 

·         Rough diamond prices have been rising rapidly. At the March DTC sight, rough diamond prices were up by about 11% on average. Alrosa and BHP Billiton’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.

 

·         There is much optimism about diamond demand in anticipation of the upcoming global jewelry shows later this spring.

 

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

 

Source: IDEX Online

 

Polished Diamond Prices Surged Mid-Month, But Settled Back Slightly

The lowest diamond prices during March occurred on the first day of the month, and the highest prices occurred during an eight-day mid-month period. Then, diamond prices slipped slightly, but began to rise again near the end of the month.

 

On March 24, polished diamond prices set a new record – 130.1 – based on the IDEX Online Polished Diamond Price Index. This was well ahead of the previous record level of 128.9 set in August 2008.

  

Month-to-Month Polished Diamond Prices Strong

When polished diamond prices are compared between March 2011 and February 2011 – based on the average price for the month – prices rose by a very strong 4.9% in March. This was by far the largest price increase in the past twelve months, as the graph below illustrates.

 

Source: IDEX Online

 

On an annualized basis, the March month-to-month price increase would be nearly 60%. Clearly, this rate of price increase is not sustainable. If it continues, it could create a price bubble just waiting to burst. Further, it could choke off consumer demand, especially without the DTC advertising of “A Diamond Is Forever” to reinforce the reason for buying a diamond.

 

Year-to-Year Polished Diamond Prices Up Solidly

Polished diamond prices in March 2011 rose by 12.7% from the same month a year ago, based on average prices during the month. 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 March’s polished diamond price increase of 12.7% is well above 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 3-4% range annually.

 

Source: IDEX Online

 

Prices Up for All Sizes of Polished Diamonds

Prices rose in March 2011 for all of the key sizes of diamonds, with some price increases larger than others. There was a surprise this month: the prices of smaller stones rose much more rapidly than prices for four-carat and five-carat diamonds. Market demand for small stones has surged in recent weeks.

 

The graph below shows polished diamond price trends on a month-to-month basis – March 2011 versus February 2011 – for key diamond sizes. 

 

Source: IDEX Online

 

Polished diamond prices in March 2011 were up strongly for all size of diamonds, on a year-to-year comparison. The largest price increase occurred for three-carat stones: up 25% between March 2010 and March 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 clearly edging higher. 

 

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% 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 – the box highlighted in red. Since prices began recovering about a year ago, the IDEX Online Index has trended solidly upward. At the end of March, daily prices for polished diamonds had exceeded the former peak price levels achieved in August 2008, though the average for the month was 128.1 as shown on the table, somewhat below the prior record. It is highly likely that polished diamond prices will continue to set new records later this year.

 

 

Source: IDEX Online