Forecast: Polished Diamond Prices Likely to Continue to Rise
"The outlook for polished diamond prices is bullish. While the U.S. jewelry market appears to be soft, other regions of the world are posting solid sales gains for diamond jewelry, especially for larger carat, high quality goods. As long as the demand for diamonds and diamond jewelry remains strong, prices will likely rise."
" Economists’ forecasts call for the global economy to remain reasonably healthy, though there could be some pockets of weak economic activity in some regions of the world such as the U.S. Overall, though, forecasters are now suggesting that the Asian, Indian and European economies will post markedly strong growth.
In the U.S., various economic forecasts are calling for the chance of a recession to be between 25 percent and 50 percent in 2008. While the U.S. market purchases roughly half of all diamonds and diamond jewelry (by value) sold in the world, other geographic regions – especially emerging economies such as India and China – are expected to post very strong growth. All in all, economic growth globally should remain on trend line, with global GDP up just over 3 percent in 2008.
The same two macro factors that have affected diamond prices in prior months will continue to have an impact on diamond prices in the near term. First, rough diamond prices are rising at a pace faster than polished diamond prices. Thus, there is much pressure on cutters and polishers to raise their prices, a trend that is likely to continue. Second, demand in most markets for diamonds and diamond jewelry remains strong. Aside from weakness in Japan and some uncertainty in the U.S., consumers in virtually every major diamond-consuming nation around the globe are vying for diamonds and diamond jewelry. "
In the U.S., various economic forecasts are calling for the chance of a recession to be between 25 percent and 50 percent in 2008. While the U.S. market purchases roughly half of all diamonds and diamond jewelry (by value) sold in the world, other geographic regions – especially emerging economies such as India and China – are expected to post very strong growth. All in all, economic growth globally should remain on trend line, with global GDP up just over 3 percent in 2008.
The same two macro factors that have affected diamond prices in prior months will continue to have an impact on diamond prices in the near term. First, rough diamond prices are rising at a pace faster than polished diamond prices. Thus, there is much pressure on cutters and polishers to raise their prices, a trend that is likely to continue. Second, demand in most markets for diamonds and diamond jewelry remains strong. Aside from weakness in Japan and some uncertainty in the U.S., consumers in virtually every major diamond-consuming nation around the globe are vying for diamonds and diamond jewelry. "
Source: International Diamond Exchange Online Research
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Opinion:
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Opinion:
Four to five carat diamond sizes have shown the sharpest increases. In the last year these sizes have increased by 45% !!!
Five carats plus have increased by 22 %.
In the smaller sizes diamonds up to 0.50ct have increased by 1.5%, 1.00ct by 3.1%, 1.50ct by 4.1%, 2.00ct by only 1% and 3.00ct by 11.3%.
We have noticed a sharp decline in demand for the once very popular 2.00ct sizes.
If ever there was a time to take advantage of diamonds from 0.60ct and above 2.00ct this is it.
In particular sizes 0.40ct to 0.49ct, 0.58ct to 0.69ct, 0.80ct to 0.89ct and 0.92 to 0.99ct in high colours, high purities and excellent to very good cuts are on very short supply and in demand.
Five grainers 5/4ct and up ie 1.15ct to 1.49ct and 1.60ct to 1.99ct are in the same category for those who do not wish pay the premium of 1.50ct and 2.00ct sizes respectively.
These still affordable diamonds are being ignored while the big money is chasing the larger diamonds and pushing the prices up.
What people fail to recognise is the eventual price increase in the one to two carat diamonds will be due to the adjustment in prices once consumers realise how more affordable they are in comparison to the rarer larger diamonds.It will be a natural flow on effect.
Further compounded is the weaker US dollar because the US economy is bleeding to support it's defence strategies overseas. The increasing price of commodities such as oil and gold is already compensating for the weaker purchasing power of the once powerful US dollar. Traditionally gold always increases when the US dollar weakens plus the demand from the growing middle classes of China and India adds fuel to the fire.
I predict gold will be as high as USD$3,000 per troy ounce by 2010. There will be not enough gold in the ground once the Chinese and Indians become even wealthier than they are now. Platinum and silver will also increase. Silver has doubled already in the last three years and is usually ignored until it's too late.
This is nothing new. It happened in 1980 and history repeats itself. A weak US dollar always has to be compensated for.
Likewise there is no way huge corporations like De Beers are going to tolerate the US dollar's weaker position by selling their rough to their nominated sight buyers. Their only solution is to increase the cost of their rough prices to make up the difference of approximately 8% devaluation of the US dollar at this stage against most major international currencies.
I would not be surprised if the Euro dollar begins to gain a foothold as the more desired currency in years to come for future diamond transactions.It's stronger and more stable.
That delicate balance of trade surpluses by the Chinese surely is being closely guarded who have trillions of US dollars now in their coffers and surely realise they are the new financial power house controlling the destiny of the world economy. The Chinese can not afford to jeopardise themselves by weakening the very US dollars they now own.
I would therefore not be surprised if the gradual change to the strong Euro dollar will evolve in the next twenty years at the expense of the US economy that seems to be stuck in it's own rut as a result of it's own insular outlook on the rest of the world it now feeds off similar to it's own foreign policy which has proved to be a dismal failure since 9/11 slapped the Americans in the face making them now vulnerable and no longer invincible.
Like it or not the Americans had to kiss arse and succumb to the cheap labour costs of the Indians and the Chinese whose economies are moving forward while the Americans are struggling with their own economy while being the world's policemen.
These days I have difficulty finding any product that does not have a " Made in China" sticker or label on it. ( I did however find in Hawaii very colourful floral cotton shirts with " Made in Hawaii "...hardly the saviour of the western economy).
And don't forget the growing diamond manufacturing business is rapidly developing in China now too thanks to the Israelis who are trying to recover their lost small diamond melee market that the Indians have dominated the last twenty years.
This is a very short term outlook by those who are looking to compete. The Chinese will also in time take control. If you think I am wrong look how many Israelis and Belgians are now importing from India under the pretence that Ramat Gan and Antwerp are major diamond cutting centres.
Why the Israelis and the Belgians are helping their future competitors is as silly as the Australians who are now assisting the Chinese to grow Merino wool which once was a unique Australian product.
The Japanese made it illegal to share their knowledge of farming cultured pearls with foreigners to protect their businesses. It's only the last twenty years they have lost that control but in the mean time it was good business.
Protection is required if prices are to remain stable and the product is to remain valuable.
In the meantime the price of polished diamonds will be steadily increase as the price of rough diamonds also increases. It's not rocket science but just a natural evolution that is seen time and time again as speculators and dealers cause the increases while availability of large rough diamonds become more difficult to find.
Take into account a cut and polished diamond is usually born from half to two thirds of it's original rough. The larger rough diamonds are required if we are to see large cut and polished diamonds.
The price of diamonds will only be effected in the short term by a weaker US dollar maybe for those savvy buyers taking advantage now but the increasing price of the rough will far outweigh US dollar devaluations in the long term and big profits are to be made for the patient and cashed up diamond dealers now who are willing to wait by hoarding their stock rather then selling.
Naturally some would disagree with me. The belief is not to sit on your diamond stock and sell sell sell no matter what as the norm. I can not see the point if you are unable to replace your stock.
The one thing most consumers seem to not realise is although the four carat plus diamonds are increasing in value as rapidly as they have it is a different story when it comes to selling these large diamonds in Australia where our market is so much smaller.
The astute dealers invest in smaller sizes because they are easier to liquidate than the big babies. These are the sizes that turnover not the big diamonds.
As much as it is a wonderful feeling to afford the big diamonds, one should be pragmatic and not overlook the smaller diamond sizes.
Smaller diamond sizes are a better buy on a per carat basis and are yet to increase in line with the larger diamonds.
Bear in mind if you can afford to buy a large beautiful diamond in excess of three carats, the eventual price increase will happen ,I believe now on a monthly basis, beyond what is now considered acceptable... but do not buy diamonds if you need to eat.
It's gonna be a big year for diamonds!
Hooooroooooo from De Guru
Daniel Katz GG
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