(IDEX Online) – Global polished diamond prices soared in June, based on the IDEX Online Global Polished Diamond Price Index.

 

The IDEX Online Index finished at 145.8 on June 30, after peaking a few days earlier at a record 146.1. The Index began the month at slightly above 133, where it held steady until just after the middle of the month.

 

In a one-week period beginning June 17, polished diamond prices rose sharply, and have plateaued at a new record level, with no signs of a pull-back or price correction.

 

The graph below illustrates global polished diamond prices for the past twenty-four months.

 

Source: IDEX Online Research

 

The graph below illustrates the daily average price of polished diamonds during June 2011.

 

Source: IDEX Online Research

 

At the end of June, the IDEX Online Polished Price Index stood at 145.8, just under the all-time record of 146.1 achieved on June 28. In the early days of July, prices seem to be holding in the 145-146 range, and they appear to be energized to move higher.

 

Month-to-Month Polished Diamond Prices Strong

When polished diamond prices are compared between June and May– based on the average price for the month – prices rose by a dramatic 5.2% in June. This gain was in striking contrast to May’s monthly price increase of just 1.1%, as the graph below illustrates. June’s price increase, based on average prices for the month, was the largest monthly gain in several years.

 

Source: IDEX Online Research

 

On an annualized basis, the June month-to-month price increase would be well over 60%, a totally unreasonable and unsustainable price increase. If it continues, it will create a price bubble just waiting to burst. Further, it could choke off consumer demand, a trend which appears to be just beginning to emerge in the American market.

 

Year-to-Year Polished Diamond Prices Up Double-Digit Levels

Polished diamond prices in June rose by a dramatic 18.5% 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 almost always less volatile than month-to-month comparisons.

 

The graph below shows that June’s polished diamond price increase of 18.5% is well above gains over the past year, with the exception of price surges in March, April, and May. The last time we saw price increases in this range was during the heady days of early 2008, just before the Great Recession gripped the jewelry and diamond industry with its “take no prisoners” bone-crushing decline.

 

Source: IDEX Online Research

 

Prices Up for All Sizes of Polished Diamonds

On a month over month basis, the prices of round diamonds below one-carat rose substantially, while stones weighing one, two, and three carats posted increases that were more moderate. Prices for four and five carat stones jumped dramatically. Market demand for small stones has surged since late Spring. 

Source: IDEX Online Research

 

On a year-to-year comparison, polished diamond prices in June were up strongly for most sizes. Diamonds one carat and smaller posted sizable price gains, while prices of four carat diamonds also rose sharply. Price gains were more modest for 1.5, 2.0, and 5.0 carat diamonds.

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: Polished Diamond 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 continue to 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. However, despite our continued caution about surging prices, there appears to be no slowdown in the rate in increase.

 

The table below summarizes the average price of polished diamonds, using the IDEX Online Polished Diamond Price Index. The pre-recession peak for diamond prices occurred in August 2008 (box).

 

Since prices began recovering about a year ago, the IDEX Online Index has trended solidly upward. During June, daily prices for polished diamonds had consistently far exceeded the former peak price levels achieved in August 2008. The new, latest record price level (red box) occurred in June. It is highly likely that polished diamond prices will continue to set new records later this year.

Source: IDEX Online Research