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With the downturn in diamond values

pyramid

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What is happening with Colorless diamonds, are they not being affected in the same way with the value of diamonds dropping due to their rarity? I notice as they sell they are not being replaced as fast as they used to be.
 

Rfisher

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Pyramid|1476453720|4087003 said:
What is happening with Colorless diamonds, are they not being affected in the same way with the value of diamonds dropping due to their rarity? I notice as they sell they are not being replaced as fast as they used to be.
In regards to your last sentence.
If it's a vendor who owns their stock, I most certainly think so they are being replaced.
If I can replace inventory at a lower price, why wouldn't I? If I want to hold onto it and wait to list for the market to swing back, I benefit.
If you are referencing a virtual stock listing- then I think they are being held by the source higher up the chain. Same concept.
 

kb1gra

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Pyramid|1476453720|4087003 said:
What is happening with Colorless diamonds, are they not being affected in the same way with the value of diamonds dropping due to their rarity? I notice as they sell they are not being replaced as fast as they used to be.
They are likely not being replaced because the more expensive rough is being held due to the market downturn and not as much is being cut, as always happens when the diamond market slows.
 

Rockdiamond

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Great thread.
One thing to point out is that there's far fewer diamond sellers that actually stock inventory these days.
There's many causes to this- and it's related to how people buy diamonds today, as well as value of inventory.
Real consumer diamond prices ( adjusted for inflation) are far lower than they were 10 years back.
Diamonds are still very popular, but people buy them online at a far higher percentage compared to 10-20 years ago, and prior when most diamonds were bought in B&M stores. This trend has lowered the average price paid by consumers quite a bit

Of the diamonds bought online, the greatest percentage of those are from sites that hold no inventory. You can easily tell which sites these are by the sheer volume of stones they list on their site.
In essence, prices don't really matter to theses "Virtual" sites, because operating under that system they simply pass along any increase, or decrease.

What I see happening is that cutters who are trying to hang on in the business miscalculated the effect of the internet. The thought, at first was, let's eliminate those dealers by putting all our stones on the largest internet sites- selling directly to consumers, and eliminating a middle man.
And they have been pretty successful in that regard- however they did not anticipate the effects.
Dealers owning a lot of inventory acted like a sponge- soaking up inventory to be held and sold.
Now, with far less dealers, cutters are forced to hold a lot more inventory than before...making their business far more difficult.
One effect is that less rough is being cut at this moment....you may notice a lessening of inventory across the board.

There's other effects as well- for example we are seeing a lot more discussions about trade up and other policies offered by sellers that can be affected by price changes.
I imagine sellers with buy back policies are really sweating this. Clearly they're in an untenable position should a bunch of consumers ask for a buyback on the same day or week- or month for that matter.
We've also seen more and more cases of consumers being disappointed by virtual sites not actually having the stone which was paid for by the consumer.


Personally I don't feel rarity factors greatly into this equation. It does seem that despite many news stories to the contrary, demand is still great for natural, mined diamonds.
 

pyramid

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Thank you Rockdiamond, that explains things for me.

I wonder if prices all go down and people are buying only from virtual sites if the cut which has been developed
so well will go back in time again to steep deep and just for money. I know GIA has their cut grade now but if there
are no dealers what about AGS cut grades. There will probably remain the few who choose this route but maybe
trading up will become a thing of the past.

I know people are saying it is part of the contract the stone was sold under but when bankruptcy or something is
looming you can see that the contract cannot hold weight at all.
 

kb1gra

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Pyramid|1476540213|4087374 said:
Thank you Rockdiamond, that explains things for me.

I wonder if prices all go down and people are buying only from virtual sites if the cut which has been developed
so well will go back in time again to steep deep and just for money. I know GIA has their cut grade now but if there
are no dealers what about AGS cut grades. There will probably remain the few who choose this route but maybe
trading up will become a thing of the past.

I know people are saying it is part of the contract the stone was sold under but when bankruptcy or something is
looming you can see that the contract cannot hold weight at all.
Can you please organize your thoughts and be a little clearer with what you're trying to say?

"If there are no dealers what about AGS cut grades" what does this mean? There are hundreds upon hundreds of dealers, who deal in all sorts of cuts from poor to AGS ideal. And what does that have to do with AGS cut grades vs GIA?

I'm not following your questions at all.

I think it's also important to realize that the vast majority of diamond buyers are not shopping to "pricescope standards" and that's fine.
 

oldminer

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Every detail about diamonds correlates to many other details. Trade up policies are subject to change and alteration in spite of the best of intentions at the time of purchase. Many trade-in or trade-up policies are close to meaningless while a few anecdotal instances show they can be superb deals for a limited number of customers and sellers. For sure, it gives the seller a very good opportunity to develop a new purchase from an old customer. It costs a lot of money to attract a new client, so getting an old one back for another sale is a very effective selling tool.

The diamond business is going through lots of changes with lowering of profit margins and changes in the distribution of merchandise. It isn't so different than what is happening in other industries, but diamonds were marketed in such traditional and structured ways for so long and the resistance to change was very great. The tide has turned and resistance has been more or less overcome by the way the newer world economy works. Those who adapt best to changes they can't prevent have the greatest chance of staying in the game. Diamonds are not really rare, but they have been marketed effectively for so long as representative of love and beauty with rarity as a core ingredient we have mostly bought into it. Diamonds can be rare because of holding back inventory, financial issues of concern to cutters and site holders, and demand for certain types of stones which can exceed their supply. Usually, these kinks in the supply chain work themselves out over a few weeks or months.

If you want to buy, few diamonds have lost value, at least in their asking price. Dealers continue to understand diamonds better than any consumers regardless of the vast amount of information consumers have access to. Dealers know a bit more still. All expert markets are like that.

If you want to sell, many diamonds are in sufficient supply that liquidation values back into the trade are not as strong as they may have been in every category. That's where a trade-in or trade-up package might be helpful, but as has been said already, some vendors may get into a position which will not allow them to continue such policies. I personally don't think such policies are of great importance in choosing a diamond for purchase, but that is a personal choice and we need to follow our own best judgment in such matters.

The issue of which labs grade which diamonds really has little bearing on the discussion of diamond value changes or trade-up policies.
 

pyramid

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kb1gra|1476541895|4087380 said:
Pyramid|1476540213|4087374 said:
Thank you Rockdiamond, that explains things for me.

I wonder if prices all go down and people are buying only from virtual sites if the cut which has been developed
so well will go back in time again to steep deep and just for money. I know GIA has their cut grade now but if there
are no dealers what about AGS cut grades. There will probably remain the few who choose this route but maybe
trading up will become a thing of the past.

I know people are saying it is part of the contract the stone was sold under but when bankruptcy or something is
looming you can see that the contract cannot hold weight at all.
Can you please organize your thoughts and be a little clearer with what you're trying to say?

"If there are no dealers what about AGS cut grades" what does this mean? There are hundreds upon hundreds of dealers, who deal in all sorts of cuts from poor to AGS ideal. And what does that have to do with AGS cut grades vs GIA?

I'm not following your questions at all.

I think it's also important to realize that the vast majority of diamond buyers are not shopping to "pricescope standards" and that's fine.

by Rockdiamond » 14 Oct 2016 18:13 above:

'One thing to point out is that there's far fewer diamond sellers that actually stock inventory these days.'

also in light of Old World Diamonds the diamond dealers are changing you see. Can you understand this now? Read
Rockdiamond's post above where he is saying that virtual list sites are just getting their info from the cutter but the cutter
no longer has dealers holding their stock so there is too many diamonds and prices/value is going down. There was a
post someone put up the other day about 'America's love affair with bling may be over', it was added into one of my posts
I believe. AGS diamonds won't matter if pricescope standards not the buyers interest. However if dealers are reducing
and diamond prices going down will we be again at the mercy of diamond cutters who just cut for weight and money and
not beauty as AGS has tried to grade for?
 

diamondseeker2006

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The only thing is, it isn't exactly true that all diamond prices are down. In fact, according to the PS chart, 1-2 and 2-3 ct stones have risen in price since the middle of last year. However most prices are down since the spike in 2011with the exception of large stones above 4 cts which have had a different pattern.

diamond-prices-per-carat-2016-10.jpg
 

pyramid

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Thanks Oldminer. I know we customers don't know everything but it is interesting trying to find out.
 

pyramid

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diamondseeker2006|1476547673|4087402 said:
The only thing is, it isn't exactly true that all diamond prices are down. In fact, according to the PS chart, 1-2 and 2-3 ct stones have risen in price since the middle of last year. However most prices are down since the spike in 2011with the exception of large stones above 4 cts which have had a different pattern.
Yes I had been looking at the chart and I know it is only average stats and that every stone is different depending upon buying price for dealer etc but I noticed myself that a Whiteflash 3 ct stone had a large difference, the one on site now is a 3.030 G VS1 ACA and it is $14,000 dollar cheaper than one which sold earlier this year which was a 3.08 or 3.09 G VS1 ACA.

I just wonder why such a difference and put it as being the cost of all diamonds going down which meant the price was so much lower. I don't know how long the larger diamond was at whiteflash for sale but the current one is graded in June 2016.

Just now notice there is a 3.267 G VS2 ACA and it is $18000.00 less than the 3.08 or 09 too. And it is a lot LARGER. I know this one is VS2 but seems a big difference also. Then that document which was posted a few days ago about America's bling fling may be over.

This is also why I wonder if higher G and lower G as well as higher VS1 and lower VS1 are making a difference in the pricing. (Meaning high G nearly F and lower G nearly an H.
 

diamondseeker2006

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My guess is that pricing has to do when they bought the stones and how much they had to pay. I've always seen some price differences in similar stones in those inventories.
 

pyramid

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Yes I remember making a post a while back about another two stones and that was the reply that came back from Brian at
Whiteflash, that their purchasing costs could make a difference on individual stones.
 

Texas Leaguer

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This has turned into an interesting discussion, though I am not sure I agree entirely with the subject line. I also think that it is hard to draw general conclusions about the market based on watching the listings of online merchants who actually stock their own diamonds. It's simply too small a sample size at this point. As the other industry veterans have already mentioned there have been many changes in the diamond industry over the last several years. Even if the diamond industry, as was also mentioned, is more averse to change than other industries. :wink2:

There was a time when jewelers actually did buy inventory and carried stock. That model began to change in the 1970's and 80's with a strong but gradual shift to consignment (aka 'memo') business. Then along came information technology and the advent of e-commerce and we see a dramatic change away from stocking inventory. Now it seems, everybody with a website can be a diamond dealer. The proliferation of online listings and the shrinking margins which they accelerated, further disincentivizes the investment in owning stock.

Companies that do invest in their own diamonds must offer a compelling value proposition, because it certainly does cost more. But we seeing that differentiation springing up here and there. And I think other companies will emerge to further that trend.

I personally believe the stocking of inventory has been a clear pendulum swing that will probably move back in the other direction as more companies learn how to to make it work. The benefits to the consumer in dealing with merchants that carefully vet diamonds and invest in in their own diamonds is substantial. Millennial shoppers, who will be the dominant market force very soon, are wise enough to understand that price and value are not the same thing.

While there are some inherent downsides to buying from virtual inventory, consumers have generally benefited from their availability. As brick and mortars continue their existential struggles, the best among them will survive and thrive. The same is true for all those new diamond dealers out there on the internet!
 

Karl_K

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The diamond industry has been very interesting to watch over the years.
I remember when I first joined PS everyone was waiting and worrying about the feb price increase from De Beers every year.
Based on how Christmas sales were the price would go up some years it was 3%-%5
in different categories to 11% to 16% one year and 8% to 10% another are just a few I recall.
Pricing was driven from the top.
Today there is a disconnect between the pricing on rough and polished that has dismantled the diamond pipeline, diamonds once passed through dozens of hands before reaching the consumer. Each step on the way added to the cost of the finished diamond.
These days 3 to 4 hands is much more common and 2 is not rare.
In short it has become more market driving with some still trying to force prices from the top but meeting with stiff resistance.
You know its a new diamond world when siteholders told De Beers no thanks we are not taking that box of diamonds.
That would have been instant death for the company back when I started at PS.

Then you have the race to the bottom on margins at the retail level. discounts, kick backs and direct sales to consumers by cutting houses. It is a battle for survival that goes on still today.

Then you have government driven efforts to gain control of some segments of the industry by pushing banks to provide cheap capital.
This leads other governments to do the same. India and China are fighting over control of the cutting and China has moved into the mining side also in Africa with state owed/sponsored companies and cheap capital.

Then you have China regulating grading and setting up a state lab and stiff penalties for what they consider improper grading.
Which is some ways was the final push for Rap and the industry to take steps that brought down egl.

In a lot of ways the diamond industry is finally growing into a modern market with a whole lot of changes some good, some bad.
Those that try and stay still are doomed to being left behind. Doing the same thing over and over again year after year will no longer cut it.

Sorry if this seems rambling but there is just so much that has happened and is happening in the last 10-15 years in the diamond industry that I thought it would be interesting to think "out loud".

These comments are my views based on my observations and conversations and some in the trade may not agree with me on some of them.
 

pyramid

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Thank you Texas Leaguer and KarlK, wonderful answers with lots of information. I see what you mean about the title of the thread, yes it should have been pricing and not 'values'.
 

pyramid

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Oh and thank you, I also know now, not to compare prices on one site regarding looking to find out how the price of all diamonds may or may not be changing.
 

Karl_K

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Pyramid|1476453720|4087003 said:
I notice as they sell they are not being replaced as fast as they used to be.
For a stocking dealer which is a better investment of capital in today's PS market 1 D/vvs1 or 3 I/si1?
 

ChristineRose

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There have always been categories of diamonds that rose in price. Colored diamonds, strong blues, D IF, H&A, have all had their place in sun. The problem is that no one knows what is going to trend next.

Also, if you visit those diamond investment sites they will show you ONLY the prices of the stone of the moment. And they never go back before 1985.
 

Texas Leaguer

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Karl_K|1476769672|4088137 said:
Pyramid|1476453720|4087003 said:
I notice as they sell they are not being replaced as fast as they used to be.
For a stocking dealer which is a better investment of capital in today's PS market 1 D/vvs1 or 3 I/si1?
Actually, I think this question starts to get at Pyramid's original post.

But it's a hard one to answer! Just when you think you see a trend and respond to it, it changes :confused:

So much depends on the demographic that a company is actually resonating with. Pricescope attracts a wide range of shoppers from those looking for best bang for the buck to those looking only for so called 'collection goods' (DEF FL-VVS). Our strategy is to have a balanced inventory.

To Pyramid's observation, and to your point Karl, you can afford to stock a lot more diamonds in the I Si range, which may account for some companies not replacing upper end as aggressively. However, in the particular case of Whiteflash, we have actually been putting more focus on collection goods lately as we generally have good depth in the VS2-Si1 H-I range.
 

Rockdiamond

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Karl_K|1476769672|4088137 said:
Pyramid|1476453720|4087003 said:
I notice as they sell they are not being replaced as fast as they used to be.
For a stocking dealer which is a better investment of capital in today's PS market 1 D/vvs1 or 3 I/si1?
Great question Karl.
For me, rarity definitely plays a role.
For example- a 1ct D/VVS1 RBC is so very easy to buy. They're all eye clean- and if you use HCA and other tools the chances of getting a badly made stone are practically nil.
Where as a 3ct SI1 might be pretty bad in terms of eye cleanliness- or it could have an imperfection which could be remarkably difficult to see- even under magnification. I love eye clean SI1 diamonds in larger sizes.
If we go down to an eye clean 3ct SI2, I'm getting more interested as a buyer.
Even in terms of cut- IMO buyers of the 3ct SI are more interested in spread, brilliance and scintillation as opposed to meeting some cheat sheet numbers.
So a stocking sellers is more likely to find a satisfied buyer with a well chosen, larger SI than a smaller VVS.
Plus, the largest virtual sites make buying a larger SI stone extremely dangerous......
 

Karl_K

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Rockdiamond|1476826647|4088377 said:
Karl_K|1476769672|4088137 said:
Pyramid|1476453720|4087003 said:
I notice as they sell they are not being replaced as fast as they used to be.
For a stocking dealer which is a better investment of capital in today's PS market 1 D/vvs1 or 3 I/si1?
Great question Karl.
For me, rarity definitely plays a role.
For example- a 1ct D/VVS1 RBC is so very easy to buy. They're all eye clean- and if you use HCA and other tools the chances of getting a badly made stone are practically nil.
Where as a 3ct SI1 might be pretty bad in terms of eye cleanliness- or it could have an imperfection which could be remarkably difficult to see- even under magnification. I love eye clean SI1 diamonds in larger sizes.
If we go down to an eye clean 3ct SI2, I'm getting more interested as a buyer.
Even in terms of cut- IMO buyers of the 3ct SI are more interested in spread, brilliance and scintillation as opposed to meeting some cheat sheet numbers.
So a stocking sellers is more likely to find a satisfied buyer with a well chosen, larger SI than a smaller VVS.
Plus, the largest virtual sites make buying a larger SI stone extremely dangerous......
I was thinking quantity 3 not 3ct but you did raise an interesting point.
A great 3ct i/si1 would probably make be a good investment for stock if one was found.


The takeaway for everyone is that figuring out best options for stocking diamonds is highly complicated and made more so that you may have to buy stones you don't particularly want to balance your order but that is another story in itself.
 

Rockdiamond

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We agree Karl- but then you have to factor in that you'll find a lot more 1ct buyers than 3ct buyers- plus, you could get 6-8 one carat I/SI1's for the same investment as the 3ct....
It's certainly not an easy business in terms of figuring out what to buy......
 
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