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Saul Singer, principal, Fusion Alternatives

Comment: Diamonds – Why polished prices are stagnating as rough prices rise


Saul Singer (pictured), a principal at Fusion Alternatives, the alternative investment asset manager specialising in investment diamonds, examines the current price movement of rough and polished diamonds.

Rough diamond prices continue to rise as evidenced by recent sales held by major diamond producers. Reports from the De Beers ‘sight’ held earlier this month in London point to an overall rise of three to five percent in rough diamond prices. Similar increases were seen at recent sales of BHP and Rio Tinto.
The continued increase in rough prices sent a clear message to the market by the major producers that demand remains robust and the outlook is generally positive leading into the all-important Holiday Season.
Other data recently released has provided further credence for this positive market sentiment. Solid quarterly results were posted by leading high-end luxury retailers, with Bulgari reporting a 13.7 percent rise in jewelry sales and leading luxury group Richemont posting a 32 percent rise in jewelry boutique sales and a 33.4 percent jump in their operating margin.
Similarly pleasing statistics emerged from diamond trading centers with U.S. net polished imports rising 20 percent in September. Notwithstanding all this positive data, polished diamond prices have yet to respond leaving many industry observers grappling for reasons for the stagnancy in polished price movement.
Needless to say, many factors are at play when analyzing the relationship between rough and polished diamond markets ranging from broader macro-economic factors, through to diamond productions cycles, time lags, the bargaining power of retailers, the psychology of diamond manufacturers in different markets and consumer sentiment.
Much has been written on the topic of the relationship between rough and polished diamond markets within the diamond industry, however many outside the industry are simply not aware of the complexity of the relationship and the seeming disparity in market movements. Although it may be a relatively niche industry, the intricacies and complexities of the global diamond industry are complex highlighting the need for trusted expert knowledge and market intelligence for those non-industry participants looking at diamonds as an alternative investment asset class.
The real catalyst for polished prices breaking their current resistant holding pattern in the immediate-term will be diamond jewelry sales during the imminent Holiday Season.
Should we begin to witness positive signals emerging out of the U.S. retail market as early as Thanksgiving Weekend one could expect robust trading in global dealer markets. The pendulum will then swing towards a seller’s market and polished price resistance levels will likely be broken on the back of shortages of many categories of in-demand diamonds.   

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