IDEX Online Research: Polished Diamond Prices Higher in January

Global polished diamond prices rose very modestly in January 2007 for the second consecutive month. While the price increase was modest – the IDEX Online Polished Diamond Price Index registered 110.73 for January 2007 versus 110.10 for January 2006 – it appears that prices in the global diamond market are firming.

January’s price increased reflected a 0.6% gain over the same month a year ago. This was greater than the 0.02% increase – essentially flat – in December. If the current trend toward higher diamond prices continues, it appears that the inflection point for polished diamond prices may have occurred in December 2006. For most of 2006, diamond prices fell versus the same period in 2005.  

The graph below summarizes the IDEX Online Polished Diamond Price Index since the beginning of 2005 through January 2007. As the graph illustrates, global polished diamond prices appear to be moving higher, after languishing during most of 2006.

With the likelihood of a global economic slowdown on the horizon, diamond prices would normally have a tendency to weaken, since consumer demand for diamonds usually weakens when economic growth slows. However, diamond prices seem to be headed slightly higher. IDEX Online Research believes this is due to a better balance between diamond supplies and demand. Further, the DTC, the marketing arm of diamond supplier De Beers, has said that it will reduce rough diamond sales levels during the first half of 2007. This will help clear the choked diamond pipeline and keep the supply and demand equation in better balance until diamond sales trends in 2007 become clear.

The graph below illustrates the percentage change, year-over-year, in monthly diamond prices for the past year. Comparisons are based on monthly average prices for all polished diamonds.

Demand for Large Diamonds Remain Strong

One of the major trends which characterized the American market in the just-completed 2006 holiday selling period was the very strong demand for larger, high-quality diamonds. Consumers want the best quality products, and they are willing to pay extra to get what they want. As a result, prices for larger, better quality diamonds continues to advance rapidly, as the graph below illustrates. For example, the “wholesale” price of 4.0 carat diamonds rose by a dramatic 19% in January 2007 versus the price of those same diamonds in January 2006.

While year-over-year prices for diamonds in the one-half to two carat range remain weak, prices for most of these diamonds rose in January 2007 versus price levels in December 2006. Thus, it appears that prices for almost all diamond sizes have firmed in the past month or two.

The IDEX Online Diamond Price Index

The IDEX Online Diamond Price Index is a real-time index derived from actual asking prices in the global diamond industry. The IDEX Online Diamond Price Index objectively reflects price trends as they happen. The Diamond Index and Diamond Drivers were formulated following comprehensive research and analysis of the IDEX Online inventory database, aggregated since 2001. Research and development were conducted in cooperation with Dr. Avi Wohl, Senior Lecturer of Finance at the faculty of Management, Tel Aviv University, Israel.

Additional information is available from IDEX Online Research: diamondprices at idexonline dot com.