Price Trends and the Forces That Shape Them

In 2008, prices started to escalate in a delayed response to the rising markets, reaching a record high in June of that year just ahead of the key U.S. trade fair JCK Las Vegas and peaked in August at 128.91. Following the global financial crash, diamond prices rolled back to mid-2005 levels reaching a low of 108.56 in September 2009.

The 2009 Holiday season was far better than the industry expected, and prices of polished diamonds have been on the rise ever since. At the same time, in response to the recession, diamond manufacturers streamlined their operations, sold old stocks, took advantage of the low rough prices and started purchasing rough with growing impetus.

 

This led to quickly rising rough diamond prices that started to pressure manufacturers to increase the price of polished. This momentum continues until today, backed, as mentioned earlier, by large and growing demand from the Chinese and Indian consumer markets and a recovering U.S. market.

 

In June 2011, polished diamond prices broke records after bottoming in September 2009. Within a year, polished diamond prices rose by 15.8 percent, according to the IDEX Online Polished Diamond Index. This is the largest such price increase since pre-crisis June 2008, when prices shot up by 14.5 percent year-over-year.

 

Further, prices have risen almost every month since the last quarter of 2009 and throughout 2010 through August 2011. In the first half of 2011, unprecedented demand from China and India, mostly a result of new jewelry store openings (China) and a shift from gold jewelry to diamond jewelry (India), resulted in a sizzling market and a price bubble. Once demand cooled, prices softened and then stabilized, a trend that is maintained until today.

In today's post-cooling period, after they plateaued, prices of polished diamonds are declining. This is a response to uncertainty in some global markets, and vigilance in the more stable countries such as China. This is also a needed price correction. Our outlook is that as the year-end nears, prices will recover and in the long-term continue their overall increase.