Price Declines

[emmebee]

I just saw the diamond prices chart for January, and it looks like steep declines for under 1ct diamonds! This worries me Even though I didn't buy a diamond as an investment, it makes me wish my SO & I had waited.. especially since it's still not on my hand! How do you all deal with the ups & downs of diamond prices?

And more importantly, when will the consumers (if at all) see the prices flow through to retail?

 

[FourMine]

Hello,

As a member of the trade, I can say that manufacturers and dealers often don't prefer price declines. Why? Because inventory is devalued and there are a multitude of business implications associated with that. Pricing is a function of supply, demand and dealer/manufacturer sentiment.

Consumers sometimes do and sometimes don't reap the benefits of such price declines. Some dealers have the capacity to hold for prices to bounce and others must sell, even if at a lower margin. A consumer just has to find a deal, which may not always be easy to identify.

In your situation, I wouldn't worry too much. Your diamond is not an investment and has sentimental value. Prices generally have trended up over the long term. Will prices go back up? Can't say for sure, but I'd like to hope they will.

Thank you,
Anubh

Graduate Diamonds | Four Mine

 

[Dancing Fire]

As a consumer I hope we do see 2004 prices again...

 

[simon123]

Hi,

I bought a diamond in late December and the dealer passed this onto me saying something about RAP prices even though I had agreed the sale price with him.

 

[emmebee]

DF, I was definitely expecting someone to say employ the same strategy as the stock market.. buy low!!

 

[Texas Leaguer]

The market has been more volatile in the past decade or so that it has been historically (with a few exceptions). I think that will continue to be the case, but long term most mines are gradually being depleted and few new ones are opening up. Unless demand drops significantly prices in the future will probably continue to increase overall.

But as a consumer you should not be trying to time the market. Think of it more like a mutual fund than a stock. If you are in the business buying and selling you need to be conscious of market movements. But as a consumer looking to make a purchase, diamonds are just as likely to be more expensive next month than less expensive. When you find the diamond that fits nicely into your personal preference matrix, that's the best time to buy.

 

[WinkHPD]

Don't feel too badly about a decline. If you live in Australia, or Belgium, the weakening of the Euro and the Australian dollar means that you are actually paying MORE for a diamond this month. (I suspect the British Pound as well, but I have not checked the currency against the dollar.)

Wink

 

[Dancing Fire]

Soon diamonds will be FREE!...

 

[emmebee]

Thank you TL and Wink, you did help put my mind at ease

 

[diamondseeker2006]

A diamond is so unlike an investment where the goal is to sell and make money. Eventually your diamond will be worth more than you paid, but that still won't matter if you are planning on keeping it! On the other hand, hopefully you bought from a vendor with an upgrade policy, so you could actually upgrade your stone and apply what you paid to a new larger diamond that is at a lower price point than it would have been when you purchased. That would be the one way you could benefit from a potential price drop.

 

[Texas Leaguer]

A diamond is so unlike an investment where the goal is to sell and make money. Eventually your diamond will be worth more than you paid, but that still won't matter if you are planning on keeping it! On the other hand, hopefully you bought from a vendor with an upgrade policy, so you could actually upgrade your stone and apply what you paid to a new larger diamond that is at a lower price point than it would have been when you purchased. That would be the one way you could benefit from a potential price drop.

Very true DS. I think it is worth mentioning that a truly good ugrade policy, one that does not have alot of stipulations or forces you to buy a much more expensive diamond, is a significant benefit. It is actually not very common in the industry as a whole although many online vendors offer it. And because what is happening online does impact the brick and mortar world, we are seeing more stores offer some form of trade-up now too.

There are a couple of reasons that you don't see it that often. One, most jewelers do not actually stock many diamonds. And two, it is a liability for the company offering it. That is, it is essentially an open ended guarantee of store credit. And as you correctly point out, in a falling market this can be a boon for the consumer and a real hardship for the merchant. We had situations a few years ago in a very soft market where customers were taking advantage of trade-ups to bigger and/or better stones with little or no out of pocket.

Somewhat surprisingly, trade up programs are not seen by many as a real benefit, particularly by young couples getting engaged, as there is a general feeling that the sentimental value is such that it will never be traded. But peoples' perspectives and financial situations do tend to change over time. We see a pretty fair redemption rate in our program, and those folks tend to be very happy that the benefit was there for them.

 

[WillyDiamond]

I find it quite humorous that an industry can continue to raise prices with an "infinite" supply of product, other than what they tell you.
If we are getting a price decrease than I am happy for the consumer.
And for the dealers who have been seeing a price increase for so many years, let me be the first to supply the salt and pepper.

 

[Texas Leaguer]

I find it quite humorous that an industry can continue to raise prices with an "infinite" supply of product, other than what they tell you.
If we are getting a price decrease than I am happy for the consumer.
And for the dealers who have been seeing a price increase for so many years, let me be the first to supply the salt and pepper.

Interesting take Willy. I am not sure what you are basing your notion of infinite supply on (?). Major mining companies have left the business in recent times because the cost of extracting the rough from the ground is higher than the market price they can sell it for. Diamond mining is a very costly enterprise. Meanwhile, existing mines are projecting depletion in near term scenarios while new mines are really not opening up.

There was a time when DeBeers controlled a very large portion of diamonds coming out of the ground and they were able to steer the market. I believe those days are over and that market forces (supply and demand) are controlling the price of diamonds and will continue to into the future.

And that is exactly why we are seeing price volatility in the market these days that prompted this thread.

 

[WinkHPD]

I find it quite humorous that an industry can continue to raise prices with an "infinite" supply of product, other than what they tell you.
If we are getting a price decrease than I am happy for the consumer.
And for the dealers who have been seeing a price increase for so many years, let me be the first to supply the salt and pepper.

I am afraid you have been listening to the "Lets all gang up on diamonds, they are evil" pundits. They have been crowing about the fall and destruction of the diamond industry for longer than I have been in the business.

I remember this "fine" book that was published back in 1982 after the fall of silver, gold and diamond prices and its prediction that I should find a new line of work, "The Rise and Fall of Diamonds: The Shattering of a Brilliant Illusion Hardcover – May 26, 1982." It is still available at Amazon for as little as $0.82 used and a bunch more for new. Apparently it is out of print and there are ten left at independent sellers who sell on Amazon starting at $67 and change. Epstein, the author, had been a famous diamond hater for at least twenty years at the time he published this book. He does not seem to have much of a track record as a prognosticator.

In spite of his dire warnings, we are still selling diamonds, which are not "infinitely" available, but are in fact not being mined at a rate sufficient to keep up with world wide demand now that the Chinese and Indian nations have developed their own diamond engagement traditions. Existing mines are running down, and there have been few new finds and only one major new mine is scheduled to open in the near future. (Canadian) The huge overhang that DeBeers Consolidated Mines, LLC once had was sold to buy back their stock and go private again and where once they supposedly had several years supply, they are reported to only have a few months supply by many who supposedly know these things.

Where once the United States consumed more diamonds than all of the rest of the world put together, we are now at less than 50% and falling rapidly in the consumption of diamonds. Even when synthetics become available at reasonable prices there will always be those who want the real deal, so I do not foresee a long term decline in prices, especially when the world wide economy finally recovers from this recent mess it has been in.

I suspect that diamonds will still be selling and at much higher prices than today, long after I am gone. The margins for the cutters and wholesalers have been shrinking since the 1980's and the retailers have had to live with a much thinner margin since the Internet companies started selling to the public at tiny margins. The "single provider" market that we had when DeBeers was that provider has been gone for some years now and the diamonds are now sold to cutters on an auction basis that lets each bid what they are willing to pay. This "open" market has led to higher prices according to some, and it certainly has allowed for price volatility that was rarely seen in the years of DeBeers having control of the majority of the supply.

As do many others in the Internet, I have both a buy back and a trade up program and I will continue to do so, since I am always happy to see one of my "old friends" back again. It is a world wide market now. Small decreases, perhaps, in the US are being seen as large increases in other parts of the world where the currencies are falling against the dollar, since the world currency for diamonds is the dollar. These ARE interesting times.

Still, haters gonna hate, so send salt and pepper, I will serve it with my dinner tonight.

Wink

 

[Dancing Fire]

[quote="Wink|


As do many others in the Internet, I have both a buy back and a trade up program and I will continue to do so, since I am always happy to see one of my "old friends" back again. It is a world wide market now. Small decreases, perhaps, in the US are being seen as large increases in other parts of the world where the currencies are falling against the dollar, since the world currency for diamonds is the dollar. These ARE interesting times.

Wink[/quote]



I wouldn't count on China in the next few yrs, b/c they are cracking down on corruption. The corrupted officials are being hunted down in the past 2 yrs and many of them are hiding under their beds. I have been telling my Chinese friends for many years that China's economy is highly depended on the flow of corrupted money. Ever since the slower flow of corrupted money in China the prices of luxury goods like high end real estate, cars, watches, jewelry, booze, etc, etc have headed south. The casinos business in Macau have slow down tremendously. Heck, even my favorite bottle of booze is cheaper by about 30% from two years ago...

 

[WillyDiamond]

Wink and Texas Leaguer---

Thanks for your input, well, you may be right about the supply that DeBeers used to control........or maybe not:

Take a look at this article which was written in Sept. 2014, so it is current.....authors seems to think lots of supply

http://www.theblaze.com/stories/2014/09/17/is-the-world-running-out-of-diamonds/

 

[diamondseeker2006]

A diamond is so unlike an investment where the goal is to sell and make money. Eventually your diamond will be worth more than you paid, but that still won't matter if you are planning on keeping it! On the other hand, hopefully you bought from a vendor with an upgrade policy, so you could actually upgrade your stone and apply what you paid to a new larger diamond that is at a lower price point than it would have been when you purchased. That would be the one way you could benefit from a potential price drop.

Very true DS. I think it is worth mentioning that a truly good ugrade policy, one that does not have alot of stipulations or forces you to buy a much more expensive diamond, is a significant benefit. It is actually not very common in the industry as a whole although many online vendors offer it. And because what is happening online does impact the brick and mortar world, we are seeing more stores offer some form of trade-up now too.

There are a couple of reasons that you don't see it that often. One, most jewelers do not actually stock many diamonds. And two, it is a liability for the company offering it. That is, it is essentially an open ended guarantee of store credit. And as you correctly point out, in a falling market this can be a boon for the consumer and a real hardship for the merchant. We had situations a few years ago in a very soft market where customers were taking advantage of trade-ups to bigger and/or better stones with little or no out of pocket.

Somewhat surprisingly, trade up programs are not seen by many as a real benefit, particularly by young couples getting engaged, as there is a general feeling that the sentimental value is such that it will never be traded. But peoples' perspectives and financial situations do tend to change over time. We see a pretty fair redemption rate in our program, and those folks tend to be very happy that the benefit was there for them.

While I don't believe I have ever fallen into the situation we were discussing, I absolutely HAVE taken advantage of trade-in policies more than once ! Hats off to WhiteFlash and to the other PS vendors who have such fabulous policies!

 

[Texas Leaguer]

Wink and Texas Leaguer---

Thanks for your input, well, you may be right about the supply that DeBeers used to control........or maybe not:

Take a look at this article which was written in Sept. 2014, so it is current.....authors seems to think lots of supply

http://www.theblaze.com/stories/2014/09/17/is-the-world-running-out-of-diamonds/

Willy,
Thanks for the link. While stories like this may be good for the publisher because they are sensational, the article is very short on facts. It relies on two assumptions contained in this statement:

"It seems likely that there’s a healthy supply of already mined diamonds being stockpiled, and while South African mines may be depleting, there’s another country that still has plenty of the rocks: Russia."

If you break that down "it seems likely" is nothing more than pure speculation. And Russia may have "plenty of rocks" and other locations too, but the missing fact is that it is still very expensive to mine them. Maybe even more expensive in Russia because of geography.

So, I would take that article and others like it with a big grain of salt!

The fact of the matter is that as long as there is a demand for mined diamonds, they will not be cheap. And the natural relative rarity of larger finer diamonds will continue to make those the most expensive.

From all that I have read, heard and seen in my career I think the odds that diamond prices continue to go up over the long term are very high. The price volatility that we have seen in recent times I believe is due to "de-regulation" of the industry and globalization of the product. And for those reasons I think fluctuations in price will continue be a part of the landscape going forward.

 

[WillyDiamond]

All good points, thanks