After months of the diamond market being in limbo, there seems to be a faint glimmer of light at the end of the tunnel. Clients are more amenable to actually buying diamonds for inventory, even though they are still very cautious and keeping a tight rein on their purchases.
What is encouraging is that the slowdown in the production of diamonds has caused shortages in regular merchandise and, while these are still selling at large discounts, the discounts are certainly much less than they were a month ago. Buyers are also becoming less picky and will settle for diamonds with a lower grading.
Fluorescent stones are no longer shunned as they once were and, in some cases, are actually the stones of preference, especially in lower colors. While this is a refreshing development, it is important that, during this current period of demand, fluorescent stones receive some positive publicity from the trade and gemological laboratories. This might be a good time to emphasize that fluorescence is a characteristic inherent to diamonds and not something that detracts significantly from their intrinsic value.
Shifts in DemandDemand remains constant for stones below 2 carats. Stones larger than 2 carats also are moving relatively well and they are now considered “big stones,” since their demand has surpassed demand for 3-carat-plus stones, beginning in early 2008. There are still calls for stones of 3 carats and larger for very specific requests, but more calls are for high colors in SI or J to K goods in VS.
The strong drift is toward dossiers from 30 to 50 points. The target markets are either China, which has come back strongly, or surrounding Asian markets. The color and clarity range is quite wide as each market has its own criteria. Most, however, tend to go more for the VVS goods in D to I colors, and the demand for these remains very high. It is becoming increasingly difficult to source these goods, especially in G to I colors.
The trend is moving toward lower colors. J to K colors have become increasingly popular as they provide lower price points. However, this is posing a problem because dossiers in these colors are much cheaper than uncertified goods and sell in greater volume.
Due to the shortage of better clarities, buyers from overseas Asian markets, while concentrating on VVS goods, tend to be more inclined to buy goods off price lists or on the internet. They are more concerned with securing the merchandise and are willing to take the risk that some of the stones may not be up to their expectations. But, as they are concentrating on better-clarity goods, the downside risk in this approach is not that significant.
One development that can be credited with improving consumer sentiment toward diamonds is that diamond prices have finally stopped falling. The headline on a recent article in one of the leading local newspapers read “Diamonds not losing their luster amid gloom.” The article, which gave an overview of the state of diamond prices, reported that, although diamond prices have come down, they are still higher compared to prices of two years ago — definitely a better performance than many other investments.
Price ImprovementPrices of some items are definitely improving. As one example, the price was up for 10 carats in DIF. Is this the only thing going up? This was the question that concerned local diamond dealers, who feel that the industry needs price increases on more than just one item.
Diamond buyers are anxiously waiting for some sort of confirmation that prices generally have stopped falling and that prices on some items are stabilizing and may even be going up. They point to the equity markets and commodities that, after dropping to all-time lows, recently climbed by 40 to 50 percent in some cases. Diamond buyers interpret this as an indication there is still money out there looking for a good buy.
On some level, it appears that the economy is responding positively to the financial stimuli of governments, but there still is no clear indication that the problems have been fixed or that markets have bottomed out. There remains some concern that the light everyone thinks they see at the end of the tunnel could very well be a train coming straight at them. So, while the industry must maintain a positive outlook, the general consensus is that it should not lower its guard and should continue to tread carefully for at least the next few months.
The Marketplace• Large stones are difficult to sell but there are still sporadic calls for important stones.
• Demand is good for H-K colors in VVS from 30 points up to 3 carats. D-F colors
in VVS or SI in 30 to 50 points are also moving well. Demand in both groups
outstrips supply.
• Goods larger than 1 carat are moving
well in either high colors in SI or in H-M colors in VVS-VS.
• Setting sizes are weak, reflecting the decrease in demand from jewelry
manufacturers.
Article from the Rapaport Magazine - May 2009. To subscribe click here.