Diamond Prices
If you’ve been to New York recently you may have seen ads for top diamond jewelry stores touting diamonds as a good value and hinting they are an investment. Because of the emotional value diamonds play in our lives, I’ve always resisted using that angle… but so has the industry. Now that highly visible names are using investment value as a selling point, I found it especially confusing, so I thought I’d investigate a little and see what I can find.
The rarity of diamonds is something everyone is familiar with. Those who doubt it do not understand the importance of grading. Every gemstone has a point where it is not much more than gravel. A few short decades ago low grade diamond material was used for industrial purposes only. Today you’ll see earrings, pendants, bracelets and even rings where the diamond is the creamy dot in the middle with the bright metal criss-cut around it. Diamonds graded to strict standards are groomed by that grading to at least the rarity they purport. The highest grade of cut equals only about 3% of diamonds. Even those of us jewelers emphasising strict grading and fine cut are struggling to meet our needs without compromise. Rarity does play into the value of an investment.
Supply and demand are not just buzz words and demand rules even over rarity. The demand for diamonds has increased dramatically over the last few decades. New markets in China and India have especially escalated the desire for larger diamonds. It’s universal appeal is critically important. Diamond stock piles have been depleted, few new sources have been found and even satellite surveys have offered little hope for continued supplies beyond the next forty years. Currently we’ve seen diamond prices come down about 5% or almost 70% of this years gains,which still leaves a gain at this point. That is a current economic condition and not a signal of any loss of desire for diamonds.
Industry conditions also have an impact on the value of diamonds but here you have to look close and do a double take to figure it out. Diamonds are bought and sold in US dollars. With the United States the single largest market you would think that makes sense but other gemstones switched to the Euro a few years ago and the markets found increased demand because if it’s stability. That may also have some dips in demand at the moment but most colored stones are not as “source to consumer” ready as diamonds. Even the beaten down dollar doesn’t have as big of an impact on cost as the fact that the diamond trade is credit heavy. From the cutters to the consumers most of the trade in diamonds is done on credit. This does more than just add to the costs, it also adds to the market vacillations. Spot shortages and occasional dumping occurs. Short but unpredictable market variations does encourage speculation. I cannot say if speculation adds or detracts from value, but I’m confident no industry will suffer constant downgrading of it’s profits for long and this one goes back hundreds of years. In retail I’ve seen degradation of grading standards and over promising as ways to pump up sales. My belief is that this is a short term fix and it only hurts the true value of the product. Industry conditions are probably neutral.
So what I found is not all one way. I’d say it’s good for us in the industry but probably not short term. For everyone else… longterm always depends on how long. Right? Right now I’ll continue to believe the real value of the diamond is in it’s magic ability to say something without words. To those we love now and even in the future. With it anyone can say something directly to our grandchildren or even our great great granchildren. We could not do this without the permanance of the diamond or the value that demands we preserve it. What we say is up to our history, or… at the moment, up to our lives. Value… !
