Diamond price increases (history and future predictions)

[denverboy]

I''ve tried googling this but can''t seem to find a good answer. Approximately how much have diamond prices increased in the 0.5 - 1.0 carat range in the last year or few years? And how much do you think prices will increase in the next year? I''m looking for a conservative ball-park figure, like 5%, 20%, etc.

I know this is an unpredictable topic, but perhaps some will have a good idea about previous years'' prices, and can give their best guess as to future prices.

 

[Lorelei]

Date: 7/28/2008 9:59:48 AM
Author:denverboy
I''ve tried googling this but can''t seem to find a good answer. Approximately how much have diamond prices increased in the 0.5 - 1.0 carat range in the last year or few years? And how much do you think prices will increase in the next year? I''m looking for a conservative ball-park figure, like 5%, 20%, etc.

I know this is an unpredictable topic, but perhaps some will have a good idea about previous years'' prices, and can give their best guess as to future prices.

This is a difficult one to answer but DancingFire posted this info recently, he found an old pricing list from 2004 by the sound of it, you can compare prices of similar now to get some rough figures.

https://www.pricescope.com/community/threads/can-we-turn-the-clock-back-4-years-i-found-an-old-list-of-diamonds.90568/

 

[denverboy]

hmm that post mentions stones that are way way higher in size/weight. If anyone has similar info for 0.5-1 carat stones that would be really helpful. I''ll try searching old posts in the mean time too.

but again, ball park %''s would be just fine

 

[denverboy]

ok according to this post:
https://www.pricescope.com/community/threads/truth-or-just-a-sales-pitch.21012/

In Nov 2004, they referenced this stone/price: 1.01 H SI1 ACA H&A for $5538
Doing a quick search on WF shows a result for: 1.02 H SI1 ACA for $6320

So being conservative, that means prices increased about 15% in the last 3.5 years. Sound about right to you guys? This is just one set of data though..

 

[Paul-Antwerp]

Under 1 Ct-size, the price increases of the last year were a lot less, say 5% if any.

Also, in future, I do not expect major increases in that size-range. The bigger the stones, the higher future price increases.

Live long,

 

[azbuyer]

typically high quality diamonds are always in demand and due to a variety of reasons always seem to be in short supply and as such prices tend to rise at least with the rate of inflation (CPI) which over the past 10 years has been averaging about 3-4% per year.

 

[elmo]

Ask a dealer (or maybe Neil/denverappraiser since you're in Denver) to pull out the Rapaport issue from January, which contains various Powerpoint-like graphs with exactly this information for the last 10 years I think for various sizes and qualities - nice charts and very easy to see trends like this.

 

[Indira-London]

Whilst you have a good estimate from Paul-Antwerp as well as other useful info from Lorelei and others, if you want to monitor trends then you might take a look at http://www.idexonline.com/Diamond_Index_Drivers.asp?SID=


There are also some useful price-related articles in their news archive.
For example: see http://www.idexonline.com/portal_FullNews.asp?TextSearch=&KeyMatch=0&id=30689

Here are the words from that artcile without the graphs:

IDEX Online Research: Record Leaps in Polished Diamond Prices in June

(July 3, ''08, 8:50 Ken Gassman)

Global polished diamond prices continued to surge in June, according to the IDEX Online Polished Diamond Price Index. On a year-over-year basis, overall diamond prices rose by just over 16 percent, a record level. Further, all major size diamonds one carat and larger posted double-digit price increases for the same period.

In prior months, prices for diamonds two carats and under had been lagging. Even half-carat diamonds posted a 5 percent price increase year-over year. Thus, it appears that diamond price inflation has finally reached virtually all diamond sizes across the board.

Diamond prices compared on a month-to-month basis showed similar trends: overall polished diamond prices rose by nearly 4 percent during the month. The increase was broad-based across every major size.

For the first six months of 2008, polished diamond prices are up nearly 10 percent over the same period last year. This means diamond prices are rising at nearly 20 percent annually. Historically, polished diamond prices have increased at a rate of 3-4 percent annually.

There appear to be six key factors that have been driving diamond prices sharply higher over the past six months: 1) solid demand from most markets, except the U.S. and Japan; 2) rising costs throughout the diamond pipeline; 3) a weakening U.S. dollar, the international currency for the diamond market; 4) a global rise in the price of virtually all commodities which has spilled over into the diamond market; 5) stock market volatility which has caused some traders to move their wealth into diamonds, precious metals, and other assets that may hold their value, until the financial markets recover; and, 6) there has been some confusion over the actual trading prices of polished diamonds based on artificial volatility reflected in some diamond price lists in the industry.

The new IDEX Online Guaranteed Diamond Transaction™ service will reflect actual prices at which diamonds trade, and is expected to become the new industry benchmark.

The big question is this: will these diamond price increases hold at retail, or are diamonds experiencing the same price bubble that have affected some other commodities?

There is a hint that perhaps the current high level of diamond prices may be moderating. Polished diamond prices surged in May and held steady in early June. But later in the month, polished diamond price levels fell modestly, searching for a new base level in the final ten days of the month. Since the end of June, diamond prices have continued to slip modestly lower.

The graph below summarizes the IDEX Online Polished Diamond Price Index for the past 24 months. This graph represents the composite average prices of all diamonds traded at the wholesale level. The slope of the line has continued to get steeper in recent months, reflecting consistently higher prices – and a greater rate of price inflation – for virtually all diamond sizes.

Source: IDEX Online Research

June 2008 versus May 2008: +3.8%

For the month of June 2008, average global polished diamond prices rose sharply at a record rate, +3.8 percent, versus average diamond prices during May 2008. June’s month-to-month leap was the largest gain on record since IDEX Online started tracking polished diamond prices in June 2004. On an annualized basis, this is a dramatic 45 percent gain in polished diamond prices, a rate that is both unreasonable and unsustainable. With sharp price increases since the beginning of the year, we believe that global diamond prices are poised to rise at a record rate during 2008, but not at the pace of June’s giant leap forward. The IDEX Online Polished Diamond Price Index, calculated on the average daily prices during June 2008, stood at 131.95 for the month, up significantly from 127.07 in May. The IDEX Online Polished Diamond Price Index stood at 100.00 in July 2004.

The graph below summarizes month-to-month changes in global diamond prices for the past thirteen months. With the exception of the September-October 2007 period and January 2008, polished diamond prices showed large gains during almost every month of 2007, a trend which continues into 2008.

Source: IDEX Online Research

June 2008 versus June 2007: +16.1%

On a year-over-year basis, global polished diamond prices surged by 16.1 percent in June. This was the largest gain on record for the IDEX Online Global Polished Diamond Price Index, and it is beyond the high end of the overall long term price inflation rate in the polished diamond industry. Further, it is 380 basis points (almost four percentage points) above the prior record price increase last month. This dramatic price increase reflects solid polished diamond demand which characterizes most global consumer markets. Virtually all sizes of diamonds posted a price increase in June, with double-digit price increases for all but the smallest diamonds half-carat and under.

It is unreasonable to believe that June’s diamond price inflation rate is sustainable, even though rough diamond prices are rising at a significant pace. However, most other commodities have risen sharply in price over the past several years. Diamonds are late to the “inflation party,” and perhaps their time has come.

As we have said many times, the polished diamond industry remains too fragmented for anyone – or any group – to hold pricing power similar to the tight-knit community of rough diamond suppliers. At the retail level, many merchants raised their prices during the first half of 2008. The IDEX Online Polished Diamond Price Index stood at 131.95 in June 2008 versus 113.67 in June a year ago.

On a year-over-year basis, polished diamond prices have shown larger and larger gains each month over the past year or so. The graph below summarizes year-over-year monthly polished diamond prices for the global market since the beginning of 2007.

Comparisons are based on the daily average prices during the month versus the same month a year ago (e.g. June 2008 versus June 2007). The year-to-year comparison takes into account the seasonality of polished diamond demand and prices.

Source: IDEX Online Research

Polished Prices Softened Near the End of June

After dramatic price increases for almost every month this year, diamond prices softened in the final ten days of June. This coincides with the slide of global financial markets as investors and merchants became more worried about the possibility of a worldwide recession in the second half of 2008, extending perhaps into 2009.

Diamond traders found that they were unable to buy and sell diamonds at the artificially high prices reflected on some industry price lists; thus, overall asking prices declined slightly to more realistic levels.

The following graph illustrates the average price of polished diamonds on a day-by-day basis for the three-month period April-June 2008. It is clear that diamond prices softened late in the month of June, and there was some volatility as traders tested their new prices.

Source: IDEX Online Research

Diamond Demand Remains Strong for All Sizes

What’s selling at retail? Merchants report that larger, better quality diamonds are in demand, and the prices of these spectacular gemstones reflects strong retail demand. However, in the month of June, diamonds of virtually all sizes posted solid price increases on a month-to-month basis.

As we have noted in the past, prices for five-carat stones have not risen as rapidly as for three- and four-carat stones. In a recessionary environment, diamond consumers are “shopping down” – foregoing the largest stones and the highest prices for something more modest, though still flashy.

The graph below summarizes the price changes for key sizes of polished diamonds on a month-over-month basis: June 2008 versus May 2008. These seven stone sizes represent about 33 percent of the trading market by value.

Source: IDEX Online Research

On a year-to-year comparison, polished diamond prices rose at double-digit levels for all but the smallest stones one-half carat and below. However, prices for large stones in the three-to-five carat range rose much more sharply while prices of stones two-carat and smaller posted only a small, but notable, gain. Did four-carat polished diamonds really rise by 76 percent year-over-year? Ask any diamantaire who deals in large high quality stones: they will confirm that prices are spiking daily.

The graph below summarizes polished diamond prices by key sizes on a year-over-year basis: June 2008 versus June 2007. These seven sizes represent about one-third of the market, by aggregate value.

Source: IDEX Online Research

Forecast: Diamond Prices Will Post a Record Price Increase This Year

Unless the bottom drops out of the diamond market – which would happen only if there is a major global recession – polished diamond prices are poised to rise at a record level in 2008, based on price gains in the first six months of the year.

Despite economic weakness in the U.S., and weakness in demand in Japan, most of the world’s economies are growing at a sustainable pace, a trend which is expected to continue. There are some worries that have surfaced recently about the possibility of a global economic slowdown later this year, particularly related to high energy prices. However, we don’t think this will be a major impediment to diamond demand, unless there is a price spike or a sudden shortage of oil.

The IDEX Online Diamond Price Index

The IDEX Online Diamond Price Index is a real-time index derived from actual asking prices in the global diamond industry. The IDEX Online Diamond Price Index objectively reflects price trends as they happen. The Diamond Index and Diamond Drivers were formulated following comprehensive research and analysis of the IDEX Online inventory database, aggregated since 2001. Research and development were conducted in cooperation with Dr. Avi Wohl, Senior Lecturer of Finance at the faculty of Management, Tel Aviv University, Israel.

 

[oldminer]

Diamonds will likely inflate in cost somewhere close to the general inflation rate. At one time this was more related to the US inflation rate, but with globalization, we may find ourselves outpaced by increases because of forces outside the USA which change how our dollar seems to act against other currencies. It really is much more a monetary policy and exchange rate situation than a simple increase in demand or decrease in supply. Although DeBeers doesn''t say a lot about supply, I have always felt they have what they need already safely stored away to meet demand for a good long period.