Impact of weak dollar ?

[SKR]

Does the continued weakness of the dollar have anything to do with rapidly increasing price of diamonds?

Debeers etc report profits outside of the US, so it would make sense for them to increase $ prices to continue to maintain profits in their home currency (as long as the demand is still there at the higher price points).

If this is the case then it''s the US consumer that suffers. People outside ofthe US, say Europe, are compensated for the higher $ diamond prices by the weakness of the $ against their home currency (Euro / £ etc).

Or am I talking nonsense ?

 

[starryeyed]

Hi SKR. This is a good question. I don't know much, but I would guess that DeBeers invests in financial instruments to hedge against the risk of currency fluctuations. I would think the rough price increases we are seeing have more to do with supply, funding for exploration and mining activities, monopoly control, etc. I would think that some of the sightholders aren't necessarily US companies either, so there are several different points along the chain that could be affected by the FX, not just diamond rough prices.

Perhaps to answer the question, you'd have to look at diamond rough prices in countries with currencies not pegged to the Dollar and where the diamonds do not pass through the US market or US companies. If there have been similar rough price increases as here in the US, then rough increases probably aren't linked to currency fluctuations. However, if the rough price increases are different, then rough increases could be currency-related.

I do know that different retailers whose home base is outside the US, e.g. - Cartier, have monthly price sheets in the US to account for currency fluctuations. So the prices for some finished products imported into the US are definitely subject to currency fluctuations, although because of hedging it's probably not a 1:1 kind of thing. Like if the dollar falls 2% one month, Cartier's price difference isn't necessarily 2% also. These are finished goods though.

Maybe an expert will chime in and explain the dynamics.

 

[simplysplendid]

Not sure if the increasing dollar has to do with the increasing prices reflected on rapaport.. but for those of us outside of the US whose currencies are strengthening against the USD, there is a little bit of good news for whatever the jewelers quote based on the rapaport -- we get it cheaper when converted to the home currency.