(IDEX Online) – Polished diamond prices were basically stable in September, after slipping from a plateau established earlier this year, as the graph below illustrates:

 

Source: IDEX Online Research

 

The global polished diamond industry continues to seek some glimmer of good news that will push prices higher in the coming months. However, so far, there has been no definitive improvement in demand either from the mature markets such as the U.S. and Europe, or from emerging markets such as China and India.

 

Polished Diamond Price Trends

The IDEX Online Polished Diamond Price Index, widely acknowledged as the most transparent and accurate indication of prices in the polished diamond market, averaged 134.0 during the month of September. In August, the Index averaged 133.9, while it stood at 143.3 a year ago.

 

Here’s what this means:

 

·        September versus August prices: up 0.1 percent – Polished diamond prices in September were up 0.1 percent. However, this is somewhat misleading, since there were two brief periods during the month when prices “popped”; these two periods skewed the average higher. If these two periods, both anomalies, were removed, the IDEX Polished Diamond Price Index would have been about 133.9, the same level as August.

Source: IDEX Online Research

 

·        End-of-month prices versus beginning of month prices: down 0.6 percent – Polished diamond prices closed the month of September lower than at the beginning. In our opinion, this is more indicative of the market trends than the averages, since the two intra-month spikes skewed the average upward.

 

·        September 2012 versus September 2011 prices: down 6.5 percent – The rate of decline in diamond prices on a year-over-year comparison has finally begun to decelerate, as the graph below illustrates.

Source: IDEX Online Research

·        Daily prices of polished diamonds were generally stable throughout the month of September, though there were two brief spikes in prices during the month. Since the end of September, prices appear to have held roughly stable, though it is too early to tell if the market is poised for a change in trend. It appears that diamantaires were “testing the market,” after recent shows in the Far East. However, there has been no strong demand from retailers during those jewelry shows, which has kept prices at their current relatively depressed level. The graph below illustrates daily price movements for polished diamonds during September 2012.

Source: IDEX Online Research

·        Year-to-date polished diamond prices: down 3.4 percent – For the first nine months of 2012, polished diamond prices have fallen by 3.4 percent from their January levels.

 

·        First nine months of 2012 average prices versus the same nine-month period in 2011: up 2.8 percent – Due to very weak prices in early 2011, the mathematical comparison of 2012 versus 2011 looks favorable. However, do not be deceived: 2012 diamond prices remain depressed.

 

Round Diamond Prices by Size: Mixed, Though Generally Lower

Diamond prices by size declined for most major sizes of round cuts in September, when compared to prices in August. The good news: prices for two-carat and five-carat stones rose during the month, though by less than one percent. The graph below summarizes month-to-month price changes for round polished diamonds by size.

 

Source: IDEX Online Research

 

On a year-over-year comparison, round polished diamond prices in September 2012 were down for all key diamond sizes, as the graph below illustrates. These price declines were consistent across all sizes of round diamonds.

 

Source: IDEX Online Research

 

Long Term Trend Shows Diamond Prices Weakening Since Mid-2011 Bubble

After rising slowly since mid-2010, most round polished diamond prices were relatively stable during the first half of 2012, and then began to fall in the summer. After nine months, it appears that the market has reached a new plateau, though it is lower than the first six months of 2012.

 

September polished diamond prices slipped for all major round stones, though they were up for almost all fancies. The graph below illustrates price trends by diamond size (all rounds).

 

Source: IDEX Online Research

 

Short Term Outlook Unchanged – Lackluster Price Trends

With the global economy barely limping along, consumers in most parts of the world have tightened their purse strings and reined in their discretionary spending. All of the major publicly held international jewelry retailers and suppliers – Tiffany, Blue Nile and Movado – have noted weakening trends, even in some Asian markets. Overall, it appears that the current positive factors affecting diamond prices in 2012 are being cancelled by the negative factors.

 

·        The OECD Composite Leading Economic Indicators for the Euro Area continue to point to below-trend economic growth.

 

·        Europe is slipping into a recession, and consumers have already cut spending. European diamond demand represents just under 15 percent of total global diamond and diamond jewelry sales.

 

·        U.S. economic growth remains lackluster, with very weak gains in the first half of 2012. Economic growth revisions show that economic activity in America was far less robust than earlier preliminary figures showed. Further, jewelry demand – as measured by fine jewelry sales at specialty retailers and other merchants – slowed in the first half of 2012 to a mid-single digit level from a string of double-digit quarterly gains in 2011. Diamond demand in the U.S. market represents nearly 40 percent of the global diamond market.

 

·        China’s diamond demand remains relatively solid, but its blazing economic growth during 2010 and 2011 has slowed this year. As a result, we expect diamond jewelry demand to pause from its previously torrid pace until it is clear that strong economic growth is sustainable in the country. China represents just over 10 percent of global diamond demand.

 

·        India’s demand for diamonds seems to be in a holding pattern currently, though the long-term prospects are very bright. India’s diamond demand represents about 12 percent of global demand.

 

·        Japan’s diamond demand is healthy and growing, but since this market is only 8 percent of global demand, it is not having a notable impact on diamond prices.

 

Longer Term Outlook Brighter For Diamond Demand

Longer term, polished diamond prices appear to be headed higher due to several factors within the diamond market:

 

·        Emerging markets, including China and India, are poised for solid long-term growth. As consumer wealth builds in these markets, shoppers will be spending more on jewelry.

 

·        Rough diamond supplies – based on credible data – appear to be flat, at best, for the next decade or longer. With flattish supply, but rising demand, the forces of capitalism will push diamond prices higher.

 

Until global economic conditions solidify and accelerate, it is unlikely that polished diamond prices will begin to move substantially higher near term. We note that price trends for most other commodities used in jewelry – precious metals and colored gemstones – have been relatively flat since the beginning of the year, with no energy to move higher until economic conditions improve.

 

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 (green box).

 

As expected, polished diamond prices were weak during the “Great Recession” which officially ended in mid-2009. Unfortunately, polished diamond prices lagged the general economic recovery, and did not begin to show an upward bias until early 2010. The new, latest record price level (red box) occurred in July 2011. After slipping, prices remained relatively stable since October 2011, until July when they began slipping.  

Source: IDEX Online Research