Price of diamonds???

Written by Piglet9j7 » July 25th, 2011, 5:05 pm:
What the heck is going on with the price of diamonds? They seem to have sky rocketed in the past two months.

Can anyone provide insight? Advice to those of us looking to buy?

It actually is going up. Some wholesalers warned clients. Whether it stays up, however, is anyone's guess. I, personally, have been skeptical. I saw precious metals go sky high before-back whenever they did...in the late 1970's or early 1980's. I think these things go up and down. My friends in the trade take the price rise very seriously, at least for the short run, however.

Deb/AGBF

Written by Piglet9j7 » July 25th, 2011, 5:05 pm:What the heck is going on with the price of diamonds? They seem to have sky rocketed in the past two months.

Can anyone provide insight? Advice to those of us looking to buy?

In one of the previous price increase threads, someone suggested to go ahead and buy now if you were in the market, but make sure you buy from a vendor that has a good lifetime upgrade policy. If prices continue to increase, you'll have already bought so won't be subjected to those increases. If prices fall, then you could essentially upgrade your diamond without having to pay much out of pocket, if anything at all.

I first starting researching in February or so, and i could kick myself for not purchasing then.

I keep reading a big reason for the increases is the rapidly growing middle and upper classes in India and China.

They hold a third of the world's population and for some inexplicable reason they want what the west has enjoyed for a long time.

I was meeting with Perry Chen at Leon Mege on Friday afternoon when he got a call. When he came back into the room, he said it was the call saying that prices are about to rise again around the end of this week. If true, I am glad we settled on a stone last week and will tie up the loose ends on it shortly. I'm not sure if melee are going to be included in that hike or not.

Written by Eskiez » July 25th, 2011, 7:51 pm:I was meeting with Perry Chen at Leon Mege on Friday afternoon when he got a call. When he came back into the room, he said it was the call saying that prices are about to rise again around the end of this week. If true, I am glad we settled on a stone last week and will tie up the loose ends on it shortly. I'm not sure if melee are going to be included in that hike or not.

Ugh! ANOTHER price increase???

Written by bertg16 » July 25th, 2011, 5:48 pm:
If prices fall, then you could essentially upgrade your diamond without having to pay much out of pocket, if anything at all.

And if that happens, vendors offering restriction-free upgrade policies could face bankruptcy.

We require a 2x spend for a reason.

There is a thread specificially about this topic. I couldn't find it for you in my quick search but you should have a read.

The three primary reasons I've seen cited are:
1) weak USD
2) strong emerging markets
3) lack of new mines plus hoarding

Regardless for many of us it's a purchase you have to make when it's appropriate for you and market timing isn't possible.

Hi All,
This morning on CNBC or Bloomberg business news they posted that DeBeers was reducing its production of diamonds by 8%.


Thanks

Written by smitcompton » July 26th, 2011, 12:11 pm:Hi All,
This morning on CNBC or Bloomberg business news they posted that DeBeers was reducing its production of diamonds by 8%.


Thanks

I believe DeBeers were actually the only rough producer (miner) who increased their output..., all other miners informed public and stakeholders production was down because of mining issues.

Written by James Allen Schultz » July 26th, 2011, 9:15 am:

Written by bertg16 » July 25th, 2011, 5:48 pm:
If prices fall, then you could essentially upgrade your diamond without having to pay much out of pocket, if anything at all.

And if that happens, vendors offering restriction-free upgrade policies could face bankruptcy.

We require a 2x spend for a reason.

Hi Jim,
There have been mass cases of vendors going under, notably in Korea 20 years ago after a cheap shot at fluoro diamonds by some tabloid TV journo's.
But in that case the vendors took back goods that they then could not sell for much because there was a sudden glut of fluorescent diamonds in the market.
But in upgrade situations do you really get many people not wanting a fairly serious step up? Surely most of the time a new prong or entire new ring is required, postage 2 ways, and hassle etc. In my (B&M) experiance we place no limit on trade ups for our stones (but we have a 2X on other stones) and we have not had any issues in 35 years.
So if someone brings back say a $5,000 stone (that is now going to be worth say $6,000) and wants to upgrade to a $8,500 stone, what is the problem with taking their $2,500 plus new ring or work on the setting on top?

I must also apologise that I am not aware of all the different companies trade up policies, and I presume there are some you feel are too generous. I hope I am not making things difficult in that respect.

Garry,

Do YOU have a trade-up policy? Why or why not? If so, what are the rules on yours?

Written by James Allen Schultz » July 26th, 2011, 9:15 am:

Written by bertg16 » July 25th, 2011, 5:48 pm:
If prices fall, then you could essentially upgrade your diamond without having to pay much out of pocket, if anything at all.

And if that happens, vendors offering restriction-free upgrade policies could face bankruptcy.

We require a 2x spend for a reason.

From the consumer's perspective, I have to disagree with this policy. If I bought a $20,000 diamond from you and wanted to upgrade, I would have to spend at least $40,000. Then you sell my $20,000 diamond for much more than I paid for it. That kind of a jump is almost the same as saying you cannot upgrade your diamond from this vendor. Knowing this, I would not buy a diamond from your company. I expect an upgrade or trade up to be the value of the stone when I bought it from the vendor.

Buy now, before prices go up even higher. Or buy pre-owned.

Seems that this is not a temporary increase? No chance they will go down in the future?

Written by centralsquare » July 26th, 2011, 9:50 pm:Seems that this is not a temporary increase? No chance they will go down in the future?

Always a chance... it's a commodities market.

Written by denverappraiser » July 26th, 2011, 8:03 pm:Garry,

Do YOU have a trade-up policy? Why or why not? If so, what are the rules on yours?

Hi Neil,
We take our stones back at what we will resell them for. If the client has recieved a discount we take this into account.
We actively market to earring clients for upgrades because we just need to repolish and rerhodium the studs and they are back in stock. We have all the info so can say "the $5,000 earrings will give you credit for $6,000 and you could buy these for $7,500, $9,000 or $15,000 pair with blah blah blah)"
For stones we end up owning not sold by us (ours are all H+ SI2+ great cut etc) we offer deals to people we dont normally sell to or use them in repairs:
http://www.hollowaydiamonds.com.au/trade-up-your-old-diamond/
Holloway Diamonds Diamond Trade Up - a revolutionary new concept, completely transparent and generous!

Here's how it works

Bring any diamond* of more than 0.25ct and we will credit you with its full resale value to your trade up. Any diamond means any old diamond, good, bad or ugly, for a new bigger or better quality diamond. All we ask is that you make an equal value contribution from your own (or someone else's?) pocket.

For example, say we decide a fair value for your diamond is $5,000. With your minimum contribution of $5,000 (or more and you get a bigger diamond!), you select your own Holloway ideal cut diamond worth $10,000. It's that simple!

Selling second hand is inconvenient, a security risk, takes time and energy and you can get ripped off. We will help you cash in the current equity in your diamond, and secure a fine quality Holloway diamond.

Your diamond will be offered for sale at the same price you traded it for; a fair resale value for both the buyer and seller. You can check the 'transparency' anytime by calling to ask the prices of our trade in diamonds. Often traded diamonds are used to match lost or old diamonds.

Trade up again and again, but expect a higher trade up value on a Holloway diamond! Some clients have actually traded down in weight, but their whiter and brighter Holloway diamond looks bigger and outshines the old stone.

Come in to either store for a free assessment of your old diamonds trade up value.

* Because we only sell natural diamonds of natural colour we can not accept synthetic, clarity enhanced or colour treated diamonds.

Hi Garry, am I reading it wrong or was the final wording also that you would require a 2x value? So if I bring in a diamond, you say it is worth 10K at resale, then I would get 10k credit, then I need to top up 10K to buy a diamond? The generosity is that every single diamond is considered at full resale price, not just your own be it vintage or preowned etc. Is this right?

Everything is cyclical in price. Luxury goods tend to do better in periods of economic recovery and economic strength. So the next time the financial world collapses it is likely diamonds would be cheaper again. Fine if you want more jewelry - not so good if you want to propose.

"Darling, when are you going to marry me?"

"Erm, the next time the Dow Jones goes into complete freefall dear"

Written by TristanC » July 26th, 2011, 11:12 pm:Hi Garry, am I reading it wrong or was the final wording also that you would require a 2x value? So if I bring in a diamond, you say it is worth 10K at resale, then I would get 10k credit, then I need to top up 10K to buy a diamond? The generosity is that every single diamond is considered at full resale price, not just your own be it vintage or preowned etc. Is this right?

Everything is cyclical in price. Luxury goods tend to do better in periods of economic recovery and economic strength. So the next time the financial world collapses it is likely diamonds would be cheaper again. Fine if you want more jewelry - not so good if you want to propose.

"Darling, when are you going to marry me?"

"Erm, the next time the Dow Jones goes into complete freefall dear"

Yes Tristan, Customer must match our offer out of their pocket. But we typically offer 3 to 5x what pawnshop and other buyers will give. So we rarely make much and can make a loss on the stone (actually its all a loss till we sell their stone), but we get or keep a client and make a nice piece of jewellery for them.

Re cycles, that's life.

Written by Garry H (Cut Nut) » July 26th, 2011, 10:43 pm:

Bring any diamond* of more than 0.25ct and we will credit you with its full resale value to your trade up. Any diamond means any old diamond, good, bad or ugly, for a new bigger or better quality diamond. All we ask is that you make an equal value contribution from your own (or someone else's?) pocket.

Garry-I really didn't know anyone in the trade had such policies. I didn't buy any of my diamonds from vendors who had trade up policies (something I planned to change in the future), so I thought I was out of luck. Recently, with the price of diamonds going up, some friends in the trade spoke to me about the possibility of selling diamonds I bought years ago and don't wear for them to recut.

I thought those were my only options. Now it looks as if I could trade in some perfectly good diamond(s) of mine and just add cash and I might be able to get the three carat diamond I thought I would never see! (There is no way on earth this could happen now. However, at some point is my life I presume my finances will be settled and this would be possible!)

Deb/AGBF

Garry,

Thanks for posting that. That’s a reasonable enough policy, but it's not as different from Jim’s as perhaps you think.

The trade-in value with his is based entirely on the original transaction price. Your's is based on the asking price set on the day of trade-in. If prices were static, these would be identical, so the difference has to do with how to handle changes in prices over time.

The presumption that all prices will go up forever is NOT a valid one. If prices go up, a theoretical seller will get a better trade-in value with your program than with his but if they go down on that particular item over the proscribed period, HIS clients will be getting the higher trade-in. Lately, diamonds have been inflating significantly faster than other things but this has not always been the case and the way of the world is clear that what goes up must come down. Diamonds are no more guaranteed to rise than gold, houses or hemlines. As with the example given above of fluorescent stones in Korea, not all stones rise and fall together. There's a huge fashion component to this that's wickedly difficult to predict. Fluorescence used to be seen as a feature, now it's seen as a defect. OEC's used to be dogs, now they're hot. Marquises used to be hot, now they're slow sellers. The stones are still just as beautiful or just as ugly as they always were, but the market changed.

It’s also worth nothing that, in general, he charges lower prices than you. I don’t mean that as a criticism, you’ve got completely different business models and yours is a full service jewelry store but for a particular item, both the cost of the initial item and the cost of the new item being traded for are going to be higher at your place. A client who buys a doodad, trades it in for 2x the price, and then trades THAT one in for 2x, will end up spending more with you than they would to do the same program for the same merchandise with Jim, even in a period of rising prices.

Another important difference I see is that, under the right circumstances, you’ll take a tradein on items that you didn’t sell in the first place. He won’t. Actually, most jewelers won’t. In this area I think your program shines. It still, of course, depends on the merits or demerits of the second deal; it's no bargain if they don't end up with what they want, but the tradein element is among the most generous I've heard of.

Written by denverappraiser » July 27th, 2011, 6:32 am:The presumption that all prices will go up forever is NOT a valid one.

There's the rub. A vendor that tells a client they can buy any diamond today, wear it for as long as they like, then come back in and trade it in for any other diamond of equal or greater value is betting that prices will only go up. It would be like a real-estate agent telling you that if you buy a house from him he guarantees to buy it back for exactly what you paid anytime in the future (as part of a trade), regardless of actual market value. It's great idea, up until the day the bottom drops out of the market.

risingsun -
If you bought a 20k diamond from us you could trade it in on any diamond you like, regardless of price. We're just not going to guarantee you full credit unless you double your spend. On a spend of less than double you would still get a huge credit from your original purchase - just not 100%. Most customers purchase diamond engagement rings in the neighborhood of $2,000-$6,000, so for those customers the idea of spending double is not nearly as daunting as the 20k to 40k example.

I think this is a brilliant discussion for consumer benefit. Varying programs to match varyingh needs.

Great to know JA has a bit of flexibility in the equation as well. How much might depend on individual situations.

I must say though that Garry's offering is also going to be very attractive for anyone with unwanted gems that they want to put towards an upgrade. As for taking back his own stones at his original prices with no 2x requirement - that protects his own customers too.

GOG has a very decent policy on their lifetime guarantee diamonds as well, as do some big jewelry houses. Consumers just need to kmow what would best suit their needs

Written by James Allen Schultz » July 27th, 2011, 8:59 am:

Written by denverappraiser » July 27th, 2011, 6:32 am:The presumption that all prices will go up forever is NOT a valid one.

There's the rub. A vendor that tells a client they can buy any diamond today, wear it for as long as they like, then come back in and trade it in for any other diamond of equal or greater value is betting that prices will only go up. It would be like a real-estate agent telling you that if you buy a house from him he guarantees to buy it back for exactly what you paid anytime in the future (as part of a trade), regardless of actual market value. It's great idea, up until the day the bottom drops out of the market.

risingsun -
If you bought a 20k diamond from us you could trade it in on any diamond you like, regardless of price. We're just not going to guarantee you full credit unless you double your spend. On a spend of less than double you would still get a huge credit from your original purchase - just not 100%. Most customers purchase diamond engagement rings in the neighborhood of $2,000-$6,000, so for those customers the idea of spending double is not nearly as daunting as the 20k to 40k example.

Jim~ I have made diamond purchases from two online vendors and my local jewelry store. In these three instances, I have been assured that I can trade in my stone for the full purchase price. I have already taken my jeweler up on this policy on two occasions. My belief is that if you stand behind the quality of your diamonds, you should not hesitate to return them to your inventory. If not, inform the customer of the limitations at time of purchase. The only way I know that consumers can get full value for their diamonds is by a trade up. I am not willing to give up this condition of purchase.

maybe,it is hard to say.

Written by James Allen Schultz » July 26th, 2011, 9:15 am:

Written by bertg16 » July 25th, 2011, 5:48 pm:
If prices fall, then you could essentially upgrade your diamond without having to pay much out of pocket, if anything at all.

And if that happens, vendors offering restriction-free upgrade policies could face bankruptcy.

We require a 2x spend for a reason.

Dear Jim,

Forgive me, but

1.
As a long-time member and contributor to the PS-forums, I am intellectually offended by your posts in this thread.

All serious analysts of the worldwide diamond-business agree that one should expect diamond-values to continue to rise in the next 10 to 15 years.

I simply cannot understand how you can, with a serious face, change the topic of this thread about rising diamond prices to one about potentially falling (or should I say dropping) prices and the resulting supposed superiority of your upgrade-policy.

2.
As a long-time member and contributor to the PS-forums, I am also personally offended by your posts in this thread.

As it stands, some of the Infinity-dealers offer probably the most generous restriction-free upgrade policies with the sale of our CBI-diamonds. Now, you could say that since I am the cutter and supplier of the stones and it is the dealers offering the upgrade-policy, I should not feel offended or attacked at all.

Let me then explain how these dealers organize this generous upgrade-policy. In fact, they are backed by a guarantee of Infinity, that we will at all times buy back a CBI-stone at the price we sold it for to the dealer. As such, you raising fear about these dealers going under has no merit, since the risk is with Infinity.

You might argue then that this does not make a difference, since the risk only shifts to Infinity, in the hypothetical case of future falling prices. Wrong again.

First, our concentration on cut-quality guarantees our diamonds to benefit from potential future stricter cut-grades.

Second, because we will celebrate our 10th anniversary at the end of this year, we have a broad spectrum of returning stones, with a mixture of profit and losses, if the market drops.

Third, our system has gone through the storm of the 2008 financial crisis without any problem, so we have a track-history of it working, also because not all sales of the past return for upgrades or buybacks.

Finally, if worse comes to worse, as diamond-cutters, we are used to occasions that we make losses on part of our production. In a downturn, we will be benefiting at the same time from falling rough prices, which are much more volatile in nature.

Of course, this specific Infinity-system only works as long as we as guardians of our brand make sure to work with sustainable prices. As a consequence, right now, our sales-price to our dealers is much lower than the current wholesale-price of average GIA-3EX or AGS-0, disregarding the details of cut-precision and brand-benefits. The result is that our most competitive retailers are now selling at very competitive prices compared to the ‘comparable copycat-quality’. This reluctance to go for the highest price-level also has a positive effect on our ability to support the dealer-buyback.

Summary: If you do not have the facts of competitors’ policies, it would suit you best to not speculate on them and create fear in the consumers’ mind.

Live long,

Getting full value is tough and it ALWAYS has a tradeoff but the first trick is defining what you mean by ‘full value’. In your case, it sounds like this means the full price that you’re paying at retail. Dealers work hard and invest fortunes in things rent, advertising, employees etc. to get those prices and you’re right, it’s hard to do. There are cheap ways to be a jeweler (ebay, friend-to-friend marketing) and there are expensive ways (do it like a Tiffany, Graff, Zales, or Blue Nile) and a myriad in between but the only way to consistently get jeweler prices is to become a jeweler. Even at that, what you paid is irrelevant. You buy as cheaply as you can, you sell for as much as you can, and hopefully there’s a profit left over when you’re done. Your customers don’t care what you paid. At the moment it’s not a particularly good gig for most but times change and even during a recession there are opportunities for those who do it well. I mention this because there are a lot of people out there who believe that diamonds have some sort of inherent ‘value’ that’s locked into the material and the only variables are a markup paid to the dealer where you get it or a discount given to the shark you sell to. This is simply not the case. Some of the biggest variables are your own selling skills and connections, your tolerance for risk, your patience to wait for the right deal, your willingness to pass on the wrong deal, and your willingness to devote time and resources to making it happen. None of these are gemological properties.

Back to trade up deals. I see a lot of these sorts of offers and I make a point to read them when I come across a new dealer. I agree that it’s an important shopping consideration. The easiest and fastest way to unload a diamond you don’t want is by making a deal with the place where you got it, and the best leverage for that deal is right up front, before you fork over the money. This is a contract between you and the jeweler and this means that you’re betting on the stability and credibility of the jeweler (more non-gemological properties). ‘Best’ will vary depending on what you want and who you’re dealing with. As I pointed out in the last post, the two being discussed are different in some fairly subtle ways. What works out best is hard for a particular customer is hard to tell. Most of Garry’s customers, for example, live in Australia. It’s not that customers elsewhere couldn’t do a deal with him but it’s logistically designed to cater to people who are nearby the store. The expectation is that a customer will show up in the store, show what they have, pick out something new from what’s there and they do a deal or not as they wish. Jim, on the other hand, I don’t think even HAS a showroom (Feel free to correct me if I’m wrong). Most of what you buy from the site is owned by other people and he doesn’t buy it until you do. That efficiency is part of why the prices are attractive. It’s not just a matter of not wishing to take it back into inventory, it never was part of inventory in the first place. There are other stores with different variations. One of the best policies out there is Costco… 100% refund in cash for any reason forever. Buy a new one or not as you wish. That pretty much blows the doors off of anything in the industry. Tiffany’s policy is no refunds, period. Buy something there and it’s yours as soon as you walk out the door. If you want to sell it later, that’s your problem. I’m sure that tweaks a few of their customers but, for the most part, people are ok with it. They shop there (or not) for other reasons. These are VERY different policies and both have a loyal customer base who insist that their choice is the best. Both sides are right because the customers are looking for different things.

Paul,
I’ll address your post in a while, I wrote the above before you posted, but I point out that Jim didn’t claim that his is ‘better’. It is what it is. I CAN say that his is a pretty typical policy and, I think, not very different from what’s offered by most of your own resellers. I also specifically agree with him that at least SOME diamonds are likely to drop in price over time. It's happened before, and it'll happen again. Whether or not this will be a problem for the dealers and/or manufcturers with outstanding tradeup or buyback polices is unknown but it's an entirely valid risk to be considering.

I am sorry, Neil, but saying that restriction-free policies could lead to bankruptcy and that being the reason for the JA-demand for a 2x-spend is tantamount to claiming the JA-proposition (not the policy) to be better. After all, if you fear that your jeweler will go bankrupt before you can exercise the guarantee, what is the use of the policy being better than?

In that sense, I interpret it as fear-based marketing and a personal attack. I am sorry if I might be oversensitive here, but with no names being named, the general dismissal of all other policies, especially the restriction-free ones seems to be directed directly at some Infinity-retailers.

My post just explains the aspect of feeling personally attacked, as well as how a restriction-free policy can easily work in our particular situation.

Live long,

Paul,

I'm sorry your are personally and intellectually offended by my posts. Ultimately, however, I stand by my opinions. Restriction free policies are speculative and inherently carry some danger to the retailer (or in your case, the manufacturer). You may be in a position to insulate yourself from some (or even much) of that risk, but you still create a small liability with each diamond sale.

All the best,

Apologies accepted, Jim.

I have no problem with the aspect of a small liability. In fact, every purchase of ours is tantamount to taking on a small liability. It was the stretch from a small liability to bankruptcy that ticked me off.

In reality, the idea of a sudden drop in pricing sounds very appealing to me. Not likely to happen soon, however.

Live long,

Paul,

Yours is not a restriction free policy any more than Jim’s, Garry’s or Costco’s. There is always fine print and it’s entirely reasonable to look at it. That's not a criticism of you, your dealers, Jim or anyone else. You've conceded the point that theres a risk here and now we're talking about how likely the risks are, how severe they are, and how to best mitigate them. Different people approach this differently and there is not a right answer that applies in all situations. Psychic powers would be very helpful in this sutation.