Pendulum Shifts To A Buyer’s Market

Posted by Saul Singer on November 1, 2012

Global diamond markets expected to remain subdued throughout November creating upside potential for buyers.

Global diamond markets continue to soften with market sentiment dampening. Although October is traditionally a slower time for the diamond industry due to the Diwali Holidays, the current downturn in market activity is being driven by more concerning underlying fundamental factors. With both rough and polished prices continuing to ease, the soft market conditions are expected to continue during November.

Trading activity in rough diamond markets remain subdued as many large Indian manufacturing businesses wind down operations for Diwali. There is a fair amount of available goods on the market however sellers are reluctant to sell at lower prices. The two major concerns facing the global rough diamond market are the diminishing availability of financial liquidity and the flat to weak demand further down the pipeline in the polished and retail markets. The most telling data emerging this week was the thirty-one percent decline in De Beers’ third quarter rough production with the company attributing the decline to technical problems at its flagship Jwaneng mine as well as difficult market conditions.

Although there was some enthusiasm in polished diamond markets in the wake of the Hong Kong trade fair in September, the momentum was short lived with no real flow-through to an increase in orders and buy requests. The downward overall polished price trend that commenced in May has continued with prices falling 7-9 percent on average during this five-month period. With the European market remaining flat and the potential fallout from hurricane Sandy on the US market it is the Asian markets that continues to underpin and sustain demand for polished diamonds.

As the pendulum is shifting away from sellers the tough market conditions have definitely provided more bargaining power to buyers. With year-end quickly approaching we expect the emergence of solid buying opportunities in both rough and polished markets. The extent of the severity of the downturn in the market will only become apparent in a few weeks time with the conclusion of Diwali and the commencement of the all-important Holiday season. Until such time we expect trading activity to remain flat with only speculators prepared to take a position on market direction and actively trade.