For the eighth consecutive month, average polished diamond prices have remained flat, rising in November a mere 0.1 percent month-over-month. Prices are still 10.1 percent below last year’s average, however the year-over-year rate of decline is shrinking.

 

·        Global polished diamond prices held steady in November, with virtually no movement during the month, according to the IDEX Online Polished Diamond Price Index.

 

·        This was the eighth consecutive month that polished diamond prices have remained flat.

 

·        Despite higher rough diamond prices, consumer demand for diamonds and diamond jewelry has been weak for more than a year, keeping polished diamond prices low. Thus, polished diamond producers have been unable to pass along the higher costs related to the rough diamonds they have purchased.

 

·        Jewelry demand in the U.S. market is showing signs of a recovery. With American shoppers consuming about half of the world’s diamond jewelry, it is likely that polished diamond prices will begin to move up, especially if the holiday selling season shows strengthening demand trends.

 

·        IDEX Online Research is forecasting a modest recovery in diamond jewelry demand for 2010. If polished diamond demand solidifies, IDEX Online Research predicts that diamond prices will rise in 2010. While our numbers are preliminary, we look for an 8-to-10 percent sales gain for the full year, reflecting a rebound in prices. When polished prices begin to recover in 2010, there could be some volatility. Furthermore, if there are any new system shocks, prices will be affected negatively. However, looking long term, we would expect polished diamond prices to settle back into historic inflation levels of 3-to-4 percent annually.

 

The graph below summarizes polished diamond price trends since the beginning of 2008.

 

Source: IDEX Online

 

The following table summarizes three years of the IDEX Online Polished Price Index by month. This information was used to construct the graph above.

 

 

Source: IDEX Online

 

 

Month-to-Month Polished Diamond Price Trends:

November 2009 versus October 2009: Up 0.1 Percent

For all practical purposes, average global polished diamond prices were flat – showing no signs of inflation or deflation – in November. The gain in the polished price index, +0.1 percent, was miniscule, and probably not statistically significant. The IDEX Online Polished Diamond Price Index averaged 108.73 in November; October averaged 108.61. The index average was largely flat since April, when the index averaged 108.40. Further, the eight-month price movement – April through November – was only a very modest 0.1 percent, which doesn’t “move the needle.”

 

Polished prices in November showed almost no fluctuation, though they did perk up at the end of the month. At the beginning of the month, the index stood at 108.09 and climbed to 109.15 by the end of the month. The IDEX Online Polished Diamond Price Index stood at 100.00 in July 2004.

 

Based on the average index level in November, total polished diamond prices are up almost 9 percent over the past five years, or less than 2 percent annually. Historically, polished diamond prices have risen by 3-to-4 percent annually. However, today’s prices are depressed from the historical trend; we would expect prices to renew their rise when demand solidifies.

 

The graph below summarizes month-over-month changes in global diamond prices for the past thirteen months. Beginning in February 2008, polished diamond prices showed large gains during every month in the first half of the year. By mid-2008, price increases began moderating. In September 2008, polished diamond prices weakened, showing consistent month-to-month decreases, a trend that continued until about April 2009, when polished diamond prices flattened and began trading in the current range.

 

 

Source: IDEX Online

 

 

November 2009 versus November 2008: Down 10.1 Percent

On a year-over-year basis, global polished diamond prices dropped by 10.1 percent in November 2009 versus the same month a year ago. November was the eleventh month that year-over-year prices dipped for polished diamonds. However, the rate of decline has begun to slow notably. This is because diamond prices peaked in August 2008 and began to soften in September 2008. The percentage drop in diamond prices will continue to decline over the coming months, as year-to-year comparisons become easier.

 

All key diamond sizes experienced some price deflation in November, with large diamonds – three carat and up – showing greater price deflation than diamonds below three carats in size. This trend – larger diamond prices falling faster – has characterized global polished diamond prices for several months. Prices of those large diamonds rose first and fastest in the current cycle. Now, they are falling fastest.

 

Even if diamond prices recover on a month-to-month basis, the year-over-year percentage change will continue to show deflation until early 2010, when comparisons against 2008 prices become much easier. However, longer term, we continue to predict that polished diamond prices will return to their historical trend line inflation rate of 3-4 percent annually, perhaps in 2010.

 

The IDEX Polished Diamond Price Index averaged 108.73 in November 2009 versus 121.00 a year ago.

 

The graph below summarizes the year-over-year inflation rate by month for polished diamond prices in the global market for the past thirteen months. Comparisons are based on the daily average prices during the month versus the same month a year ago. The year-over-year comparison takes into account the seasonality of polished diamond demand and prices.

 

 

Source: IDEX Online

 

 

Day-to-Day Diamond Prices Stable

Polished diamond trading patterns in November on a day-to-day basis showed almost no significant price fluctuation, as the graph below reveals.

 

 

Source: IDEX Online

 

 

Polished Diamond Price by Size Are Mostly Steady

After rising rapidly in 2008, only to fall just as quickly at the end of the year, diamond prices by key sizes appear to have bottomed. Even more likely, we believe that they are poised to hold steady and will begin moving higher in early 2010.

 

During November, there were no unusual trends by size of diamond. The graph below summarizes price trends from the beginning of 2007 for the seven key sizes of diamonds, which represent just under one-third of the total value of the trading market. 

 

 

Source: IDEX Online

 

 

Forecast: Diamond Prices Poised for Recovery

Short of some kind of a system shock, IDEX Online Research believes that polished diamond prices bottomed in April in the current cycle. From here, they will likely show positive month-to-month comparisons in subsequent months, especially as demand picks up in the U.S. market.

 

At some point, probably in 2011, we believe that diamond price annual inflation rate will recover to its historic level, reflecting annual inflation of 3-4 percent. However, as polished diamond prices attempt to find new higher levels, there could be some price volatility, especially among certain size and quality of diamonds.

 

The U.S. market consumes roughly half of the world’s diamond jewelry. Its economy is showing vitality, after significant weakness over the past year. Further, other regional economies around the globe are also showing some signs of recovery. Along with these recoveries, consumers will resume purchases of luxury goods, though initially at a historically lower pace.

 

The IDEX Online Diamond Price Index

The IDEX Online Diamond Price Index is a real-time index derived from actual asking prices in the global diamond industry. The IDEX Online Diamond Price Index objectively reflects price trends as they happen. The Diamond Index and Diamond Drivers were formulated following comprehensive research and analysis of the IDEX Online inventory database, aggregated since 2001. Research and development were conducted in cooperation with Dr. Avi Wohl, Senior Lecturer of Finance at the faculty of Management, Tel Aviv University, Israel.

 

Additional information is available from IDEX Online Research. The e-mail address is diamondprices@idexonline.com.