Rough Prices are Tugging or Polished Prices are Anchoring

Rough diamond prices rose by about 5 percent between late March and the end of April. This is true for the major producers and outside rough suppliers alike. The industry was willing to pay an added premium to first hand buyers, pushing up the prices further by a few percentage points.

But at some point, something changed. As we recently reported, in the week following the DTC Sight, the market cooled down almost at once. Premiums declined by one or two points and boxes, in their original assortments, started circulating in the market without a buyer. 

A recent price analysis we did, shows that while polished diamonds regained about one third of the price lost during the crisis, rough diamond prices rose, on average, back or nearly back to their pre-crisis high.  

Are polished diamond prices serving as an anchor, preventing rough prices from moving too far off? Is the anchor line starting to tighten?  

There are three types of speculative buyers in the market. Manufacturers who buy rough with the hope that polished prices will raise enough to make the rough purchase worthwhile by the time the rough is polished, manufacturers who want to protect themselves from future rough price hikes, and dealers who buy to sell for a quick profit.  

If the market has largely decreased its purchases, all three buyer types potentially know that we have reached a certain limit.  

To justify the current prices of rough, polished prices have to raise or rough prices need to cool off. From miners to wholesalers, players in the market with whom we spoke could not explain buyers’ recent willingness to pay high rough prices.  

At this point, we expect the prices of rough to moderate, and the upstream market to explain to jewelers they just have to pay more for polished. The question mark hinges over retailers’ ability to sell for more and the consumers willingness to pay more.