Weak Dollar

[pk]

Has the weak dollar affected diamond prices in the same way as other "natural" recources? Everything in the world is up against the dollar (except the yen) and I am wondering if we have seen this in diamond prices. If so then where in the diamond trade is it most evident?

 

[justageek]

Hey pk,

I'm sure that it has affected diamond prices via the exchange rate, but I haven't noticed a big jump yet. If you're in Europe, I'm sure diamonds from America are looking reaaally nice right about now. However, it's my understanding that the bulk of the diamond trade happens in America, so it wouldn't surprise me that the dollar price hasn't increased much but nominal prices in other currencies have decreased.

Even if U.S. prices have gone up, it's difficult at best to conclude how much of it is due to inflation/deflation and/or changing exchange rates vs. the fact that so many other related goods have gone up in value (not just price) as well during this time. Gasoline needed to transport diamonds, rents for B&M's, and construction materials, etc., have all gone up recently. It seems the diamond industry has taken the brunt of the hit -- which makes sense since living costs have also gone up and, at the end of the day, the average consumer finds that diamonds are less necessary than gasoline.

Price increases would be more likely to occur in chains and other B&M stores where they're also having to deal with increased rents and increased values of international salaries.

 

[JohnQuixote]

Date: 12/17/2007 11:45:01 PM
Author:pk
Has the weak dollar affected diamond prices in the same way as other 'natural' recources? Everything in the world is up against the dollar (except the yen) and I am wondering if we have seen this in diamond prices. If so then where in the diamond trade is it most evident?

Plenty of discussion on both sides of this topic. Some threads of note:

9/2006 GIA Symposium comments (4th post down and again in Martin Rapaport's comments)
https://www.pricescope.com/community/threads/scenes-from-gia-symposium-2006.50294/

5/2007 Diamond prices going up that much?
https://www.pricescope.com/community/threads/diamond-prices-going-up-that-much.61314/

10/2007 Diamond prices to go up?
https://www.pricescope.com/community/threads/diamond-prices-to-go-up.71527/


I bookmarked this Smart Money article from Halloween (spooky dollar talk).
http://www.smartmoney.com/dealoftheday/index.cfm?story=20071031

It hits jewelry from two perspectives, noting that the weak dollar and worldwide demand has sent some prices skyrocketing - most notably high-end diamonds and large sizes... But, since diamond prices are (currently) pinned to the US dollar average quality stones in plentiful sizes may become bargain-priced.

 

[Paul-Antwerp]

Diamonds, both rough and polished diamonds, are traded in US Dollars. The weakening dollar has a bad effect for miners, who often have a lot of non-USD-costs, like in Southern Africa and Canada, and even in Western Africa, where most of the currencies are pegged to the Euro. So, mining faces higher expenses, while they sell their output in a weakening currency.

In the same way, many diamond-cutting companies have non-USD-expenses, so for most diamond-cutters, they also have a lowering margin.

Luckily, in some sizes and qualities, prices of polished diamonds are rising, which gives either the cutters or the mines some room to counter their dwindling margins.

For a consumer however, it makes no difference in which country a diamond is sold. If you are earning your salary in non-USD, you are probably paying less for a diamond now than last year. Whether your retailer is in the U.S., Canada, Europe or Asia, he is buying his diamonds in USD, and while some prices have gone up in USD, most increases did not compensate for the weakening dollar.

Live long,