Diamond Prices Set To Stabilise

Posted by Saul Singer on June 6, 2012 – 1:38 pm

In alignment with other financial and commodity markets, investment diamond prices are down around three percent since the beginning of the year.

Investment diamond prices fell a further 0.8 per cent in May and are down around three percent since the beginning of the year. The easing in investment diamond prices has been driven by the jitteriness in the market resulting from uncertain macro-economic environment and concerns about a stagnation in demand growth from major diamond consuming markets. This downward price trend in Investment Diamond prices is in alignment with other financial and commodity markets.

There has been much in the press recently regarding the pulling of the Graff Diamond IPO from market that had aimed to raise $1 billion. Some market commentators have indicated that this development does not bode well for the diamond market and points to a lack of investor support in the diamond market. We believe that the decision to withdraw the IPO was more related to timing issues in current volatile equity markets than an indication of lack of investor support for diamonds. It is also important to note that an investment into Graff Diamonds would only give investor exposure to Graff Diamonds as a stand-alone company and could potentially be used as a proxy for diamond prices in the very niche ultra-high-end sub-sector of the market and which does not reflect overall diamond price movements.

We expect investment diamond prices to stabilize over the next few months. Initial reports from the world’s largest diamond and jewellery trade show held in Las Vegas last week point to a stable yet cautious trading environment. Rough diamond prices should continue to ease this month allowing manufacturers to re-enter the market and buy more aggressively which in turn should spur polished diamond trading activity as the Indian market returns from its vacation period. All eyes turn to Hong Kong later this month for the next major international diamond and jewellery trade show which should provide further insight into Asian market sentiment which has underpinned global diamond demand growth over the last 12-18 months. Market fundamentals remain strong into the medium-to-longer term as demand is set to continue to outstrip supply supporting upward pressure on diamond prices going forward.