(IDEX Online) - Polished diamond prices continued to rise in April 2011, according to the IDEX Online Polished Diamond Price Index. Based on average prices during the month, polished diamond prices have surpassed their prior record levels set in August 2008, just as the global recession was beginning to have a head-on impact with the world’s diamond and jewelry industry.

 

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

 

·         Between April 1 and April 30, polished diamond prices rose by about 1.6%, one of the larger increases since the price recovery cycle began near the end of the first quarter of 2010.

 

·         On a month-to-month basis – April versus March – polished diamond prices rose by 1.9%, based on average asking prices during both months. This was one of the largest price increases since 2008.

 

·         On a year-over-year basis – April 2011 versus April 2010 – polished diamond prices rose by 13.9%. This price increase was substantially above prior year-to-year prices increases in the post-recession period, and is surpassed only by the year-to-year increase of 14.5% which occurred in June 2008.

 

·         On a year-to-date basis from January 1, 2011, through April 30, 2011, global polished diamond prices have risen by 9.9%. This price hike annualizes to a 30% increase, based on the prospects that prices continue to rise at the same rate for the balance of 2011.

 

Polished diamond prices have been driven higher by several factors:

 

·         Rough diamond prices have been rising rapidly. Rough diamond prices were up an average of 15-20% for smaller carat diamonds at the March DTC Sight. 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.

 

·         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 for the first quarter of 2011 confirm that these trends have continued into this year.

 

o   In China, diamond demand has been showing consistent growth, in a wide range of goods.

 

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

 

·         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 and restore eroding margins.

 

·         Diamond demand at the early spring diamond and jewelry shows has been very strong.

 

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 Research

 

Polished Diamond Prices Rose Slowly All Month

The lowest polished diamond prices occurred earlier in the month, and the highest prices occurred later in April, as the month came to an end.

 

On April 19-20, the IDEX Online Index set a new record, 131.5. This was well ahead of the previous record of 128.9 set in August 2008.

 

The graph below illustrates the daily average price of polished diamonds during April. 

 

Source: IDEX Online Research

 

At the end of the month of April, the IDEX Online Polished Price Index stood at 131.1. In the early days of May, it was just over 131, and appears to be energized to move higher.  

 

Month-to-Month Polished Diamond Prices Strong

When polished diamond prices are compared between April and March 2011 – based on the average price for the month – prices rose by a solid 1.9% in April. This gain was more in line with historical patterns than March’s price surge, but it is still at the high end of the range of monthly price gains over the past year.

 

Source: IDEX Online Research

 

On an annualized basis, the April month-to-month price increase would be nearly 24%. While this annualized rate is much smaller than the price surge in March, 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 April rose by 13.9% from 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 almost always less volatile than month-to-month comparisons.

 

The graph below shows that April’s polished diamond price increase of 13.9% is well above the past six months’ gains. This suggests that prices in the early phase of the recovery are rising at triple the long term growth rate of polished diamond prices – in the 3-4% range annually.

 

Source: IDEX Online Research

 

Prices Up for All Sizes of Polished Diamonds

Prices rose for all of the key sizes of diamonds, with some price increases larger than others. There was a surprise: 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 – April 2011 versus March 2011 – for key diamond sizes. 

 

Source: IDEX Online Research

 

Polished diamond prices were up strongly for all size of diamonds, on a year-to-year comparison. The largest price increase occurred for three- and four-carat stones: up nearly 25% between April 2010 and April 2011, as the graph below illustrates.

 

Source: IDEX Online Research

 

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 Research

 

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 index of polished diamonds, based on the IDEX Online Polished Diamond Price Index. The pre-recession 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 April, daily prices for polished diamonds had consistently exceeded the former peak price levels achieved in August 2008. It is highly likely that polished diamond prices will continue to set new records later this year.

 

Source: IDEX Online Research