Fancy Color Prices will Bounce Back

Fancy color diamonds - pinks, blues, yellow and more - have long been seen as a safe haven for investors.

They hold their value even when economic upheavals hit their colorless counterparts.

As the prices of colorless diamonds fell during every quarter of 2022 and 2023, fancy color prices kept on rising. Until now.

In Q2 of 2024 the FCD (Fancy Color Diamond) Index, compiled by the Fancy Color Research Foundation (FCRF), recorded its first drop since the Covid crisis (Q3 of 2020).

The New York-based FCRF says the 0.7 per cent decline is "relatively insignificant", and confidently predicts a return to growth. But not immediately.

Big spenders in the US are putting their purchases on hold until after the elections in November, it says.

"The market faces uncertainty due to upcoming elections and the effects of high interest rates, which have tempered some luxury spending," according to Miri Chen, CEO at FCRF.

"However, we have indications that once the U.S. elections conclude, prices for colorless diamonds are likely to start increasing.

"This trend is expected to positively influence the fancy color diamond market as well."

The Index, tracking prices of all sizes and intensities, has increased during most quarters since its inception in 2005.

The only notable exception was a sustained period of decline during the financial crash of 2008.

Fancy color diamonds have, overall, proved to be highly resilient to fluctuations in the economy.

The price of yellow diamonds have increased by 56 per cent in the last 19 years. Blues have gone up 248 per cent and pinks, the best performer of all, have increased by 398 per cent.

The slight drop in Q2 reflects a sustained downturn in the global economy - fancy colors are resilient but not impervious - plus the time of the year.

"If I had to pinpoint the main reason for this slight decline, it would be the seasonal price softening typically observed during the summer, as is the case every year," says Chen.

She also points to sanctions on Russia and limits on overseas spending in China, in addition to US uncertainties.

"The Russian market, once known for its significant contribution to the jewelry sector, has been severely disrupted due to the ongoing war in Ukraine," she says.

"And the resulting sanctions, removing a key demographic from the potential client list for most jewelers.

"The Chinese market, a dominant force in global diamond consumption, is currently undergoing changes under the new economic regime set by the president, which includes limitations on spending, especially outside of China.

"This has impacted large luxury brands, who are managing high inventory levels post-Covid and are cautious about increasing demand until these levels decrease."

What she describes as "significant transactions" are still taking place, primarily to wealthy collectors, and the FCRF has seen an increase in valuation requests for investment purposes.

"As the broader diamond market stabilizes, particularly after the U.S. elections, we believe that the prices of fancy color diamonds will continue their upward trajectory."

Have a fabulous weekend.