What is your perception or reasoning behind price hikes of diamonds?

[pricescope]

Next question: What is the consumers perception / explanation or reasoning behind price hikes of diamonds?

I think most consumers think it is a De Beers fiction and diamond prices are inflated artificially. Others understand it is a market like oil or gold based on supply and demand.

What do you feel/think about price increase?

 

[AGBF]

Date: 3/30/2005 7:20:15 AM
Author:Pricescope

I think most consumers think it is a De Beers fiction and diamond prices are inflated artificially. Others understand it is a market like oil or gold based on supply and demand.

Leonid,

Anyone who has gone to school knows what to answer when the teacher poses the question in this way! If the unknowledgeable "think" and the knowledgeable "understand", the answer the teacher wants is whatever the heck the knowledgeable supposedly understand! As a one-time student I would DEFINITELY say that OF COURSE the reason for any rise in prices is because diamonds are a COMMODITY...like oil! Even if I don''t have a clue why that would be so!

Deb

 

[strmrdr]

What AGBF said.
Its hardly a fair question when put that way.

I understand supply and demand I also understand underhanded business practices, artificial shortages and illegal price fixing that is rampant in the industry.

 

[Lord Summerisle]

I understand supply and demand I also understand underhanded business practices, artificial shortages and illegal price fixing that is rampant in the industry.

there thats better

 

[strmrdr]

Date: 3/30/2005 7:41:41 AM
Author: Lord Summerisle

I understand supply and demand I also understand underhanded business practices, artificial shortages and illegal price fixing that is rampant in the industry.

there thats better

Name one other market that has the level of open price fixing as the designer setting market.
Mark my words eventually they will tick off the wrong person and they will be taken down hard by the Law.


You fooling yourself if you think the same thing isnt happening in the rest of the jewelery industry including diamonds.

 

[Lord Summerisle]

Just one?

The RHD Car Industry in Europe
Cross Channel Ferries
Credit Card issuers
ATM machines...


Actually the Euro car industry has had its knuckles rappted a couple of years ago over its sales... but nowt has changed.

 

[valeria101]

How would you guys feel if diamond prices in Pricescope''s database will drop accross the board ?

Talk about "shrinkage" !

I''d feel quite foolish trying to predict diamond prices. As far as I know, and who and how sustains these prices has been changing and change will not stop.

Whatever happend "cheap diamonds" is an oxymoron. I hope it stays that way.

 

[fire&ice]

Date: 3/30/2005 7:39:16 AM
Author: strmrdr

I understand supply and demand I also understand underhanded business practices, artificial shortages and illegal price fixing that is rampant in the industry.

YET - we keep buying them. The demand is there. And, I've maintained that I do think supply is limited - perhaps controlled - but limited.

 

[Lord Summerisle]

Is it a either/or situation?

 

[Maxine]

I was told that DB has "built in" price increase.......!!?? Is that true??

 

[hoorray]

I believe it is supply and demand based, but the rough supply is "managed" to keep the prices at certain points and to increase them when desired. It does not operate like a naturally free market.

 

[lizzyd]

I agree that the way the question, as posed, is not objective.

Once again, Stmrdr hit the nail on the head.

I certainly understand supply and demand. And, I also understand the effect a monopoly has on a market. I could be wrong here, but my impression is that DeBeers has much more of a stranglehold on the diamond market than any single country or vendor has in the oil or gold industries.

 

[baltneu]

I thin the price of diamonds is manipulated by the big manufactures, like DeBeers. Come on, if I walk into a store and want a 2ct rock, and the jewelre does not have it in stock, he will tell me he can get it. I think the supply stuff is BS.

 

[SquareCut]

Why is the monopoly allowed to exist? Is it because it is a luxury item? Why such steep price hikes? Is it greed?

 

[strmrdr]

Date: 3/30/2005 2:36:21 PM
Author: SquareCut
Why is the monopoly allowed to exist? Is it because it is a luxury item? Why such steep price hikes? Is it greed?

They arent under US jurisdiction for the most part.
They are a SA company.
They recently settled with the justice department for some actions of their US arm in the past.

Because they can.
Of course its greed. Greed makes the world go round dont ya know.

 

[Garry H (Cut Nut)]

Date: 3/30/2005 11:22

8 AM
Author: lizzyd
I agree that the way the question, as posed, is not objective.

Once again, Stmrdr hit the nail on the head.

I certainly understand supply and demand. And, I also understand the effect a monopoly has on a market. I could be wrong here, but my impression is that DeBeers has much more of a stranglehold on the diamond market than any single country or vendor has in the oil or gold industries.

oK - the question ius not objective. bad bad Leonid! (Actually I wrote those words

)

Have you heard about OPEC and OIL?
When the price is low they agree to pump less out of the ground.

When diamonds are at risk of becoming cheap De beers once upon a time asked miners to work lower grade reserves and leave the richer lodes till when the market recovered. Today De Beers has largely given up that control and runs on a very lean stockpile as it competes with Riotinto and BHP. There ios no stockpile anywhere today.

But rio and bhp are not likely to get involved in a price war. If DB puts up prices they rub their hands toogether.
If DB''s put up prices too high then no-one buys the rough. They tend to put up prices when they learn or know that sightholders are selling their sights for 10% or more than DB sold them for. Wouldn''t you?

 

[aljdewey]

Date: 3/30/2005 7:20:15 AM
Author:Pricescope

Next question: What is the consumers perception / explanation or reasoning behind price hikes of diamonds?

Because they can. Because the market will continue to bear it.

Diamonds aren''t a necessity purchase, they are a luxury purchase. When John Smith decides that the price of diamonds is just too ludicrous for him to purchase one, he''ll withhold his dollars and purchase something else instead. When enough John Smiths do that, the market will have said "THIS is too much" and those who influence pricing wil have to reconsider (much as they did post-9/11 when luxury purchases shrunk up and pricing either dropped or levelled off without increase.)

As long as consumers feel reasonably confident making luxury purchases, price hikes will continue. Diamonds aren''t a practical purchase, they are an emotional purchase and based less on what''s prudent and more on what he/she will like.

 

[Dancing Fire]

i don''t think diamonds are rare,i saw a program on tv a couple yrs ago ,they show inside a big vault (somewhere in Russia) there''s bags & bags of uncut diamonds.they say if that quanity hits the market in a short period of time it would bring the price of diamonds down to nothing,so it must be big demand for the price increase lately.

 

[RockDoc]

I agree with Gary''s opinion about OPEC / and the Oil Cartel.

De Beers is a momopoly by their choice. However their control of the marketplace has decreased over the years. However, De Beers remains the driving force in marketing.

Geographic culture also plays a factors. Cartels and monopolies, are generally only considered bad by those in the US. People in other countries have lived and not made price fixing, and momopolies illegal, as we have here in this country.

De Beers only has a presence in the US through its advertising agencies. Currently, many sightholders have been "forced" to change their marketing strategies brought on by De Beers.

Think about the photos that Gary has posted, with cutting room with hundreds of employees cutting diamonds. These companies have to keep those cutting wheels going to pay their overhead, so not being able to get a supply of material to cut really shakes up their financial health. Some price increases may be happening to cover overhead expenses, not just the affects of supply and demand. There are many factors which influence prices.

Also consider that diamond pricing over that last couple of years has increased less than a lot of products have increased.
Yesterday I bought a container of non dairy creamer, that was $ 1.79 yesterday, that two to three years ago was about $0.99 to $ 1.19. Recently, tomatoes in Florida were being sold for almost $ 4.00 a pound. Several weeks later the same grade was priced at $0.99 per pound. Milk here to has been priced higher and lower by substancial margins. A protion of the food increases is due to increases in shipping costs as well. Last week I was in one of the "high rent" food stores and a NY Strip Steak was priced at $ 19.00 a pound.

In produce products the prices constantly go up and down.

In comparison, De Beers'' s increases are modest compared to many other industries.

As another example look at postage... years ago you put a 5 cent stamp on an article, mailed it and it was there the next day. Today it costs over $10.00 and is called Express Mail.

I find it very suspicious, that computer software is often priced at the exact price by several sellers. At least in diamonds, there is competition between B&M''s and Internet Sellers, just to name two market levels. SO a certain amount of pricing is dependent on competition between sellers. It just isn''t all greed and price fixing in the diamond market.

Rockdoc

 

[perry]

Actaully, to correct term for the Oil Industry, diamonds, and several other markets is "oligopoly." A mononpoly is where one supplier controls the market. An oligopoly is where several suppliers control the market. The other larger players could take DeBears down, but there is no reason for them to do so - and they all make more money by constantly increasing prices than by creating a competitive market place. You probably need about 3 times the number of suppliers that currently exist to create a competitive market place in diamonds - or oil.

Perry

 

[Antwerpman]

I think people credit DeBeers with more power than they actually have, and with the intelligence to control things in the way that they envisage (which is not necessarily the case)

You also have to consider the fall of the dollar against all major world currencies, in order to maintain local operating margins in a dollar denominated business, then the mines need to be increasing their $ costs just to remain level in their local currency. Look at South Africa where many recently profitable mines are now running at a loss (not just in diamonds but also gold etc)

The other thing that most people on here do not appreciate is that DB is actually the supplier who has increased its prices least recently, and it is generally the last to do so. As Gary said, when they see their clients walking out of their offices and 2 days later selling their recently purchased goods at a 10% premium without even unsealing the parcels, then it is a natural reaction to feel that they have undersold their goods.

Dont forget that the supplying countries generally also have some form of price discovery mechanism, where they can test the markets to see if DB are actually obtaining the maximum value for their goods, and if they feel they are not they will then pressurise them to do so.

 

[baltneu]

I think that this conversation will soon be moot!

If the price of oil keeps going in the direction it is going, then people are going to have to decide whether they need a diamond on the finger or oil in their home heating tanks and gasoline in their car.

I read an article that even though the price of gasoline has increased over 50% in the last year, American demand is 2% higher at this time, than it was a year ago at this time. The oil co''s are also say they are predicting a shortage of gasolline for the summer vacation months in the US, that is pretty scary.

So, as I said earlier, diamond on the finger or gasoline/oil in the tank.

ps. they also say that Americans will not change their demand for gasoline until it goes to $105 per barrel, now that is pretty scary.

 

[Antwerpman]

you just need to look at what europeans pay for their gasoline compared to people in the US to realise that even if the price does double demand will still remain strong