Diamond research & data analyst Edahn Golan outlines the various global factors propping up polished diamond prices.
A combination of healthy financial standing, robust consumer demand, and a surge in Covid infections in India are expected to keep polished diamond prices strong in the coming months.
If the midstream of the diamond industry manages its inventories well and avoids over- manufacturing, polished diamond prices may lead to continued increases till year end. Yet, there is a caveat.
Polished diamond prices have been rising continuously since August 2020, increasing monthly for seven months. This is the longest price increase stretch since early 2013, some eight years ago.
During these seven months, polished diamond prices posted an average rise of more than 13%, up 2.4% in the past month alone.
As the global economy was hit by a pandemic that forced store closures, retail sales took a beating. With it, prices of most all products declined, diamonds included.
We understand that the resurrection of polished diamond prices started in August – strong demand by consumers stuck at home with spare money and a desire to strut some stuff after lingering in their pajamas for way too long.
But the question on most diamond industry minds is will this trend continue? What market forces are supporting it, and which trends may drag down prices.
One force supporting wholesale prices is continued consumer demand. International travel is still rather restricted, and consumers – especially American consumers – are looking for avenues to spend.
Another force supporting prices is the grim effects of the pandemic in India. Currently, the country is facing a major infection wave hitting among other places, Maharashtra and Gujarat, the two states hosting India’s diamond hubs of Mumbai and Surat. In recent days, the Bharat Diamond Bourse was forced to shut down due to the recent Covid surge and, naturally, that slows down business.
In addition to offices closing, some polishing facilities have been impacted as well, something that will lead to shortages. When in-demand goods are in short supply, prices rise.
That said, this situation is only temporary. Another sign that may support price hikes due to decreased availability is the decline in rough diamond supply. True, supply in the first three months of the year was higher than in 2020 and 2019, but unlike in the past, we are seeing a consecutive decline in supply every month. This, too, will impact the supply of polished diamonds and prices come summer, when these goods will be made available to jewellers and jewellery makers.
But here is the caveat: While we rightly pinned most of the price decline in 2020 on retail shutting down during the early part of the Covid pandemic, polished diamond prices have been softening continuously since early 2016. In fact, except for a small rise in late 2015, prices have been heading down since August 2011.
There are reasons for this – poor marketing by retailers, lack of consumer enthusiasm, and fashion trends that lead away from diamonds. Has any of that changed? Not just in the temporary short term, but has the fundamental sentiment changed?
If it hasn’t, polished diamond prices will slide down again, and continue the declining trend of the last few years. If, however, consumer sentiment has changed and industry marketing efforts have improved, then continued robust pricing can be expected.
Edahn Golan is a veteran of the diamond industry, researching and writing about it since 2001. He specialises in a wide range of topics relating to this unique industry, including the way it operates, wholesale and retail polished diamond prices, the rough diamond sector of the diamond pipeline and investment in diamonds.
Edahn has written extensively about these subjects and many others, including the Kimberley Process (KP), financing issues, ethics and changes in the way the diamond industry has operated over the years.
Prior to founding Edahn Golan Diamond Research & Data, Edahn joined the IDEX Online Group to form the news and research department of its newly launched website.
Over the years, Edahn has advised leading diamond firms, industry bodies, investment companies and governmental agencies, writing research papers on topics ranging from provenance analysis of fancy color diamonds and the diamond’s contribution to local economies to the viability of investment in diamonds.
Follow him on Twitter @edahn.