IDEX Online Research: Polished Diamond Prices Up Significantly February (Full Report)
March 03, 10
Global polished diamond prices rose 2.3 percent in February 2010, according to the IDEX Online Polished Diamond Price Index. This is the third consecutive month that polished diamond prices have risen, after languishing for most of 2009.
Three key factors are pushing polished diamond prices higher:
· Rough Diamond Prices are Rising – Rough diamond prices declined 13-15 percent in 2009, while polished prices remained about flat. After two DTC Sights in 2010, De Beers' rough prices are up by about 15 percent so far this year. Rough diamond pricing pressure is finally having an impact on polished diamond prices.
· Anticipation of Re-Stocking of the Diamond Pipeline – Diamond pipeline inventory levels are very low, especially at the retail level. Some retailers have begun to re-stock jewelry, after selling down their inventories over the past two years. This increased demand – and the prospects for growing demand, both at the consumer and retail level – have emboldened polished diamond producers to increase their prices.
· Global Economy Recovering – The global economy is showing solid signs of shaking off the recessionary environment that has existed since late 2007. Further, the
In the past couple of months, most of the strengthening demand has come from diamonds three carats and smaller. However, in February, prices of larger carat stones – four and five-carats – began to rise on a month-to-month basis. While prices for smaller gemstones have risen above the level of a year ago, larger gemstone prices remain below year-ago levels.
Key Statistics: Polished Diamond Prices, February 2010
· The IDEX Online Polished Diamond Price Index averaged 112.6 in February, up more than 2 percent from January’s average of 110.1.
· The IDEX Online Polished Diamond Price Index ended February nearly two points higher at 113.2 versus its level at the beginning of the month of 111.4, for a gain of about 1.6 percent.
· The recovery in polished diamond prices began in December 2009. Since the bottom – about 108 in the period April-November period – diamond prices have risen by nearly 5 percent through the last day of February.
The graph below summarizes polished diamond price movement based on the IDEX Online Polished Diamond Price Index for the past two years.
 Source: IDEX Online |
Outlook: Higher Diamond Prices on the Horizon
Polished diamond prices rose by nearly 3.5 percent between the beginning of January and the end of February. On an annualized basis, this would be a 21 percent gain. While that dramatic increase is not sustainable for any length of time, it illustrates the momentum that is building to push polished diamond prices higher, both near term and over the longer term. Clearly, polished diamond prices are headed higher.
Month-to-Month Polished Diamond Prices Up 2.3 percent in February
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In February, global polished diamond prices rose 2.3 percent from January, based on average price levels for the month. Our forecast calls for a modest double-digit gain in polished diamond prices this year. However, even if diamond prices rise by 10 percent or so during 2010, they will still end the year below the peak level in mid-2008.
As noted earlier, global polished diamond prices rose by about 1.6 percent in February when measured from the beginning of the month to the end of the month. While there are two fundamental external tangible factors pushing up diamond prices – a global economic recovery and higher rough diamond prices – diamantaires are also pushing prices higher in anticipation of re-stocking at the retail level, both in the
The graph below illustrates month-to-month changes in global polished diamond prices, based on the IDEX Online Polished Diamond Price Index.
 Source: IDEX Online |
Year-to-Year Global Polished Diamond Prices Rise in February
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After declining by mostly double-digit levels for the past year, polished diamond prices reversed that trend in February. For the month, the average polished diamond price rose by 1.8 percent in February, when compared to prices in February 2009. On an annualized basis, this indicates that polished diamond prices could rise by nearly 22 percent.
Last month, we said that it makes no sense to extrapolate future diamond prices based on the year-to-year price comparison, since we apparently have reached the inflection point in the diamond demand curve. We are still at that inflection point, when the direction of prices is changing from a downdraft mode to an updraft mode. Suffice it to say: diamond prices are headed higher.
The graph below illustrates the year-to-year polished diamond price trends on a monthly basis for the past 13 months.
 Source: IDEX Online |
Daily Polished Diamond Prices Show Sustained Increase in February
On a daily basis, polished diamond prices showed a solid, sustained upward movement during the month. Reports from various global jewelry shows held in January and February were promising, and diamantaires have been able to implement higher prices – which appear to be holding.
Polished Price Trends Vary Significantly by Size of Gemstone
Diamonds of all sizes showed solid price gains in February 2010, when compared to the prior month of January. This is a welcome change for diamantaires; until now, prices for larger diamonds, particularly four carats and above, were lagging, while prices for smaller polished stones – two carat and below – had turned upward.
We believe that the previous price disparity between smaller stones and larger gems was due to the market during the recession: consumers have been “buying down”. Now that the recession is over, and jewelry demand has perked up, there appears to be demand for all sizes of diamonds.
The graph below illustrates price trends on a month-to-month basis for polished diamonds by key size.
 Source: IDEX Online |
The good news is that shoppers – and buyers – are back in the malls. The challenge is for jewelers to sell consumers better, larger diamonds.
The table below summarizes month-to-month price movement by key diamond sizes over the past three months.
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Three-Year View Reflects Rising & Falling Diamond Demand
The following graph illustrates polished diamond price trends for the past three years by size, based on the IDEX Online Polished Diamond Price Index. There was clearly a diamond price bubble which occurred in mid-2008. The bubble burst late in the third quarter of 2008 as consumer demand waned; diamond prices fell and financing in the diamond pipeline dried up. IDEX Online Research believes the recovery in diamond prices has begun.
 Source: IDEX Online |
Year-to-Year Diamond Price Decline Reversed in February
The table below summarizes the year-to-year price trends for polished diamonds by size over the past three months on a year-to-year basis. The good news is that for the first time in many months, there are positive numbers on this table.
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Economic Recovery = Higher Diamond Prices
The
Since American shoppers consume roughly half of the global production of diamonds and diamond jewelry, it is important to focus on this market. For sure, there are other potential growth markets –
As the