RAPAPORT... Although Hong Kong is enjoying terrific spring weather, the diamond market is showing signs of an early slowdown for the summer. Consumer demand has dropped significantly and, even though May had such highlights as Golden Week, the arrival of the Olympic torch in Hong Kong and Mother’s Day, jewelry retailers reported that business did not compare with 2007.
Another reason for the sales decline may be that both traders and consumers have still not adjusted to the rising price of diamonds. Demand is still strong but dealers find that, although they can sell the diamonds they have in inventory, they cannot replace them with new goods and still make their same margin of profit.
This feeling goes all the way back to diamond producers, who are feeling the pressure from charging higher prices to cover the cost of the ever-increasing prices for rough diamonds. Some have stopped manufacturing, causing a shortage of diamonds.
Fast-moving items are banded in a very narrow range and are always in short supply. These have gone up so much lately that, in order to maintain profitability, retailers and dealers are increasingly willing to compromise on quality, as long as the discounts are larger.
SI clarities are becoming more popular because the prices for this grade have not been the subject of increases for quite some time now. Not all SIs are accepted but, as demand grows, it is only a matter of time before buyers become more accepting of these stones.
With the American market slowing down, there should be more goods of this grade in the pipeline looking for buyers.
G is GoodG colors have been neglected for a long time, as the price difference between a G and H was substantial. G colors were virtually unsalable. But, in the past few months, the prices for D to F colors kept going up and the huge demand for H and I colors created shortages. As a result, the G colors have started to look more attractive.
Fluorescent Bias?
Diamonds deemed fluorescent have a troubled history. Any stone with a certificate that mentions fluorescence is quickly rejected, even if it is the most beautiful diamond. The buyers don’t even bother to look at it.
This all started many years ago when a diamond report mentioned that fluorescent stones should be discounted in price. The Koreans were the first to shun stones that had any fluorescence. Over the years, virtually all markets, even those that once paid premiums for fluorescent stones, began rejecting the diamonds only because of this characteristic.
There are many grades of fluorescence and even if a stone shows fluorescence under a UV light, it may not be visible either by the naked eye or under magnification. It is true that some fluorescent stones are “milky” and should be discounted, but this should not be the case for all stones with fluorescence.
It will take a concerted effort by the trade, gem labs and the media to change the view of the public in the matter of fluorescence.
Gemological GraffitiOriginally, a gemological report only gave the measurements of a stone, its color, clarity and weight for purposes of identification. Reports have now evolved into giving much more information, but, to the layman, is all that information really pertinent? And does it help — or hinder — sales?
Clarity grading is usually faithfully plotted in the certificates, but sometimes fine imperfections, which are hardly visible under 10X magnifications, cover so much of the stone that all the layman sees is a mass of “graffiti,” which discourages him from purchasing the stone. Extensive comments on certificates can turn buyers off a stone, even if they don’t understand what the comments are saying and even if the comments relate to characteristics that even a trained gemologist cannot see with a diamond loupe.
Some in the industry have suggested that using dossiers for large stones might be a better approach. It would eliminate the graffiti as there are no diagrams of the diamonds on dossiers and it would also cut down on some of the superfluous grading information.
No one disputes that certificates are a valuable tool for the diamond trade but, in every specialized trade, tools are made or adjusted over time to fit the changing needs of the market. Some in the industry believe that now may be the time to make adjustments in certificates.
Marketplace • Shortages in large diamonds maintain strong demand and demand for
exceptional stones is still extremely strong. However, buyers are beginning
to be more concerned about budgets and choosing larger discounts over
better grades in cut, polish and symmetry.
• Fluorescence is still a problem in diamonds of higher grades but
becoming more acceptable in either lower clarities or colors.
Article from the Rapaport Magazine - June 2008. To subscribe click here.