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IDEX Online Research: Polished Diamond Prices Unchanged in October

18 november 2009

Market demand for diamonds during October, as the industry was heading into the all-important Christmas holiday selling season, was enough to keep polished diamond prices in the trading centers from sagging, but it wasn’t strong enough to push diamond prices higher.

Polished diamond prices showed almost no movement during October, the final month for diamond shipments into the U.S. market for Christmas consumption, according to the IDEX Online Polished Diamond Price Index. The Index had its narrowest trading range in months – it moved less than a hundred basis points between the high point and the low point during October – shown as an Index of 108 on the IDEX Online Polished Diamond Price Index.

There was a slight flurry of trading activity just after the middle of the month, and it appeared that prices might move higher. But by the end of the month, polished diamond trading activity settled back to the level of the past several months.

Because of weak demand and sluggish polished diamond trading activity, most of the market requirements are being met from existing gemstone inventories in the diamond trading centers. As a result, polished diamond prices have remained in a very narrow trading range since this spring – some would say that prices are stuck in a rut – with no immediate sign that the market is headed higher . . . or lower. We note, however, that there have been some signs of price strength in certain larger higher quality size stones. It is not clear if these prices are sustainable, or just the result of internal pricing adjustments within certain trading bourses.

Diamantaires are pinning their hopes on stronger demand in 2010. With the likelihood that the world’s largest diamond market – the U.S. – may experience a slow recovery from the economic funk that has affected diamond demand for two years, diamond traders are focusing their efforts on developing sales in emerging markets such as China. The Chinese New Year is celebrated in February, and it represents an opportunity for consumers in that country to give gifts of jewelry. Further, there are brightened prospects for jewelry demand during the gift-giving season surrounding the Hindi New Year in India, as well as the wedding season post-Diwali. 

Even though the U.S. market may not fuel significantly stronger diamond demand in 2010, there are some factors that will contribute to sustained higher demand – primarily the expected increase in the number of weddings. Driven by favorable demographics – a baby boomlet of Millennials born in the 1980s – the number of weddings has continued to rise in America, despite the recessionary environment. However, the average ticket for a diamond engagement ring is down by an estimated 10 percent, about in line with other spending cuts that brides have made in their budgets.

Despite continued weak demand in the U.S. market, IDEX Online Research is forecasting that jewelry sales will rise very modestly during the all-important holiday selling season of November and December. If this forecast materializes, it will be the first positive news from the American market in almost two years. With last year’s sales during the holiday period extremely weak, it is almost a given that sales this year will be stronger. Not only is the American economy on the mend, but recent jewelry sales comparisons have been “less bad.” Jewelry sales won’t return to the levels of the heady days of 2006 and early 2007 – when holiday sales were in the $9.0-9.1 billion range (for all jewelry, about half of which is diamond jewelry) – but they will be better than last year’s disastrous $7.2 billion. We are currently forecasting total jewelry sales for 2009 Christmas selling season of $7.3-7.4 billion. This would generate a positive percentage comparison of +1 percent-2 percent, and it would be a tremendous psychological boost to the industry.

The bottom line is this: diamantaires’ hopes are high, but sustained demand has not materialized yet. Despite pockets of pessimism, IDEX Online Research is certain of one thing: the Recession of 2008-2009 will not derail 50,000 years of humans’ cultural affinity for jewelry, gemstones, and precious metals. The market will rebound.

Diamond Prices Depressed Versus Last Year

The IDEX Online Polished Diamond Price Index peaked thirteen months ago at 128.91 in August 2008 in the current cycle, and it began an eight-month free-fall from there, stabilizing in April 2009. In October 2008, the IDEX Online Index was 127.02. Since the peak in August 2008, polished diamond prices have fallen about 16 percent. Owners of stocks, bonds, and real estate wish they had been as lucky: their investments fell by as much as 50 percent, before bottoming early in 2009.