Rough Diamond Price Hikes

The following brief appears courtesy of Gems & Gemology‘s G&G eBrief

Intellectual Property: Gemological Institute of America and Gems & Gemology

Image courtesy of De Beers Diamond Promotion Service.

Author: Russell Shor (Senior Industry Analyst, GIA Carlsbad)

Dealers are seeing a slowing of price increases for rough diamonds. Photo © De Beers Diamond Promotion Service.

After a year of steep increases, rough diamond prices appear to be moderating, according to major diamond manufacturers. This may help reduce the growing impasse between retailers wary of scaring off consumers in a fragile economy — and manufacturers who are obliged to pass along the higher prices.
 
There are four reasons behind this moderation:
Manufacturers are finally listening to analysts’ concerns that rough prices are too high. Retailers and jewelry manufacturers have been leaving deals on the table rather than accept the hefty increases. This is why the DTC lowered prices on some types of commercial-quality goods at the June sight.
The major rough buyers — the relatively small group of players who act as a “secondary cartel” in the rough market and have been responsible for most of the speculation of the past year — are now holding back to gauge the market’s ability to absorb more price increases. These players buy more rough then they need for their own activities and stock it until clients come, bids in hand, to take it. They are driven by the belief that rough supplies will grow shorter over time and the value of their stocks will appreciate.
Some diamond manufacturers are still concerned that the reduced demand for rough reflects a “second dip” in a slowing market.
Over the shorter term, June and July are vacation months in India and Israel, when manufacturing typically slows and there is less demand for rough.

Russell Shor
Senior Industry Analyst, GIA Carlsbad

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