Going Up or Down: Where are Diamond Prices Really Headed?

There’s been some discussion of late regarding the direction of diamond prices, with IDEX posting (based on our extensive data) that prices headed upwards in March, while another leading trading platform said the opposite – that prices actually fell last month.

So, how can this difference be explained? One way is to say that it is an issue of reporting one’s “gut feeling,” of what the situation “should” be, versus what our extensive data is actually telling us. This means that if we were to focus on the current sentiment of the market, when we know that Sight goods are being left on the table, that demand is muted and we are in a slow period, it would seem logical that diamond prices should have dropped in response – economics 101.

If we were in the habit of publishing our “opinion” we would probably say that this is what happened. However, market prices are not up to us; they are up to the market. IDEX does not publish any “view” or “opinion” on diamond price trends. We publish price trends based on market data. And yes, sometimes, even in a relatively “weak” downstream market (weak diamond and diamond jewelry demand and sales), we see polished prices going up.

On the whole, prices tend to follow a fairly cyclical pattern. We know that there are certain periods when prices are likely to fall, just as there are times when they are likely to rise. For example, we traditionally see a rise in prices before the important trade shows, and this is exactly what took place in March as a result of the Hong Kong and Basel trade events, but it can explain the peaks seen before trade shows at any time of the year.

As exhibitors collect goods from the market, there are naturally fewer items available to buyers in the global exchanges. This naturally puts pressure on prices, causing them to rise. Whether these price increases take hold or not is always something of an unknown and is affected by the actual level of demand and sales during the shows (among other market drivers.)

In addition, when there is a halt in manufacturing of polished, as has happened with Indian-based manufacturers recently, there are again fewer goods available in the market, which puts pressure on polished prices, pushing them upwards as well.

Both of these factors explain why, despite a period of relatively weak jewelry sales, we saw a rise in polished prices during March.

It's also important to always keep a wider perspective when following price trends rather than just looking at the immediate here and now. Taking this wider view reminds us that polished prices have mostly been headed downward since mid-2011, with the exception of occasional traditional seasonal peaks, March 2015 being no exception.

We have been asked about the accuracy of a pricing tool based on asking prices rather than actual transaction prices. Clearly, a price list based on actual transactions would be the most accurate tool, and currently, IDEX is the only platform that has a fully automated transactional platform.

It is worth emphasizing that these fully automated transactions take place electronically online. This is not information that is passed on to us second-hand by suppliers telling us what they sold; these are real online transactions.

While we have been gathering this data since 2008, and we do make it available to IDEX users, it will still take some time until we publish a transaction based price list, given that there are thousands of diamond categories.

As for pricing products based on asking prices, they are definitely a reliable tool for monitoring market trends. While they don't tell you the exact price a diamond is sold, like an actual transaction does, professional buyers and sellers are familiar with market margins and trends, and eventually the diamonds are regularly sold at “x” percent below asking prices.

Having collected and analyzing asking prices for 15 years, and transaction prices since 2008, we can say with confidence that the trend lines of both tend to be pretty much the same.