Poor Economy vs Diamond Prices.. Any Correlation?

[mishamish]

Hello, I’m looking to purchase an engagement ring sometime in the next few months. As the economy dwindles away, I’m feeling my budget decrease as well. I was curious about how this economy affects the price of Diamonds. I understand that the traders and producers try to keep the price as steady as possible regardless of external factors.

Finally to my question…

Should I wait a few months in anticipation of a decrease in prices or just go for it now?

I read an interesting article this morning, but it didn’t really give a definitive answer either way:

http://www.suntimes.com/business/1297757,CST-NWS-diamonds25.article

 

[Paul-Antwerp]

There is diamond pricing, and there is diamond pricing. What I am trying to say, is that diamonds are traditionally traded at various levels, cutter to wholesaler, wholesaler to national wholesaler, wholesaler to retailer, retailer to consumer.

As such, this article might be a rather good one.

Industry predictions are that American retail diamond sales will decrease about 0.3% this year. Compared to an earlier production of 2.8% growth, of course, this is not good. Especially in the current holiday-period, sales are expected to be between 5 and 10% less than last year.

All this has little to no effect on retail-prices of diamonds.

Further upstream, at the wholesale-level or at the cutter''s level, the effect of a small decrease in expected sales has a huge effect. Retailers, national wholesalers, international wholesalers are all adjusting their stock-level to a lower expected demand. In this way, a decrease in expected demand of 3% quickly leads to a 30% decrease in demand in the major diamond-trading centers. I must say that most companies here in Antwerp are complaining loudly these past weeks.

Again, also this 30% decrease does not automatically lead to prices dropping enormously. Diamond producers (the chique name for diamond miners) have assessed the situation, and are reducing their output by stopping their low-efficiency mines or by reducing sales (Alrosa, the Russian producer, will sell part of its production to the Russian Treasury). It is a matter of months before supply in the pipeline will have adapted to the new demand-situation.

This leads me to the following advise: do not wait for retail-prices tumbling. It will probably never happen.

Live long,

 

[JoeNewbie11]

Be aware of the source of diamond price predictions on PS or anywhere else. I think the consumer will be hard pressed to get a gloomy prediction from any diamond retailer. It''s like asking the Home Building Industry or National Association of Realtors will housing prices continue to fall for the next 2 - 3 years (most of them say prices will bottom by mid-2009 in the US, which is ridiculous by the way).

The world is in a deflationary period now, which is good for the consumer, but bad for the retailer. Why buy today, when it will be cheaper tomorrow? This goes for homes, cars, gas, and many other commodities/purchases.

I am no diamond expert, but I understand this. Demand dictates price. Affordability dictates demand. Income/Credit dictates affordability. Jobs dictate income/credit. Credit is difficult to come by now, whether it be credit cards or HELOCs, this source of purchasing power has been diminished as a result of the credit bubble bursting (just read about the US Federal Govt. extending the bailout to credit cards, student loans, car loans, etc. because the credit industry doesn''t trust the consumer to pay back their debts). The other side of the purchasing power equation is incomes. US wages have been on average stagnant for the past 8 years, while commodities have risen, this reduces the consumer''s purchasing power. Stock portfolios have taken a huge hit and even the well-to-do are reducing their discretionary spending. Lastly, the unemployment rate is increasing rapidly. Remember, when companies anounce they''re laying off 10-15% of their workforce, this is not just direct labor, this is also indirect labor (managers, directors, executives, etc.) and these people are the ones who have extra income for diamond purchases. When the question on people''s mind is "Will I have a job tomorrow?", you can be sure people will cut back their discretionary spending, which includes diamond purchases.

My advice to the consumer, which will be unpopular with the retailers, is to wait if you can.

 

[Maisie]

Date: 11/25/2008 1:31:02 PM
Author: JoeNewbie11
Be aware of the source of diamond price predictions on PS or anywhere else. I think the consumer will be hard pressed to get a gloomy prediction from any diamond retailer. It's like asking the Home Building Industry or National Association of Realtors will housing prices continue to fall for the next 2 - 3 years (most of them say prices will bottom by mid-2009 in the US, which is ridiculous by the way).

The world is in a deflationary period now, which is good for the consumer, but bad for the retailer. Why buy today, when it will be cheaper tomorrow? This goes for homes, cars, gas, and many other commodities/purchases.

I am no diamond expert, but I understand this. Demand dictates price. Affordability dictates demand. Income/Credit dictates affordability. Jobs dictate income/credit. Credit is difficult to come by now, whether it be credit cards or HELOCs, this source of purchasing power has been diminished as a result of the credit bubble bursting (just read about the US Federal Govt. extending the bailout to credit cards, student loans, car loans, etc. because the credit industry doesn't trust the consumer to pay back their debts). The other side of the purchasing power equation is incomes. US wages have been on average stagnant for the past 8 years, while commodities have risen, this reduces the consumer's purchasing power. Stock portfolios have taken a huge hit and even the well-to-do are reducing their discretionary spending. Lastly, the unemployment rate is increasing rapidly. Remember, when companies anounce they're laying off 10-15% of their workforce, this is not just direct labor, this is also indirect labor (managers, directors, executives, etc.) and these people are the ones who have extra income for diamond purchases. When the question on people's mind is 'Will I have a job tomorrow?', you can be sure people will cut back their discretionary spending, which includes diamond purchases.

My advice to the consumer, which will be unpopular with the retailers, is to wait if you can.

I have no reason to believe that Paul would be dishonest. He has a reputation here for being an honest and helpful poster.

 

[strmrdr]

Paul isn''t dishonest about how he sees things but I do believe that he may be a little on the optimistic side on this.
It really depends on where in the market one is buying and what one is buying.
Large diamonds that were boosted by extreme speculation are already dropping.
Internet prices will be the last to move because of the low margins and higher margin sellers have been dropping down to that level.
When they hit that level is when internet prices may move and that will be a while.
The market overall is swamped with polished right now with little movement in large segments of the rough market.
It as always depends on how Christmas buying shapes up what will happen next year.
In the mean time here is a chart showing what happened up to 10/27/2008 on dec 1st we need to talk Andrey into making an updated one.

 

[psadmin]

Hey Karl,

I plan to update the Chart on a monthly bases.

The next update will be Monday.

Andrey

 

[strmrdr]

Date: 11/25/2008 2:34:06 PM
Author: PS Admin
Hey Karl,


I plan to update the Chart on a monthly bases.


The next update will be Monday.


Andrey

Way kewl
Thank you.

 

[denverappraiser]

Predicting the future is a job for psychics, not diamond cutters and appraisers and it’s fraught with difficulties but, that said, I get asked variations on this question constantly. It’s true that we all have our agendas, including Paul and me and it’s worth bearing in mind that the forecasters in the magazines have a vested interest as well. Theirs is in predicting sensationalistic things. Bad news sells newspapers pretty well.

Consumer spending overall is clearly in a downturn and I think it’s reasonable to predict that spending on diamonds will go down at least as fast as with other things and possibly faster given the entirely discretionary nature of the product. That said, other than a few blips, I don’t see that translating into significantly lower prices, especially on the high end type goods routinely discussed here.

I do foresee significantly fewer, especially at the low end, and that may result in a more competitive market for the sort of goods that are stocked at dealers like Penny’s, Mervyn’s and Whitehall’s and there may be some deals while those goods work through the pipeline but I think it’s a mistake to see the ‘diamond business’ as a single entity. Most retailers and most manufacturers are already working on margins that don’t support the overhead and this doesn’t lend itself to a sale unless it of the ‘going out of business’ type. Although I’m sure we’ll see some of that in the coming months, I will be very surprised if high quality and popular goods with be driving it. It simply hasn’t gotten any cheaper to mine, cut, ship, tax, grade etc. and these are the things that drive the prices and it’s just to easy to either move stones from one market to another or to simply sit on them and wait. Bad news for cutters, mine workers and jewelers who may need to go find jobs doing something else but not necessarily a windfall for shoppers.

For people looking for an I2/L/Marquise, there may indeed be opportunities on the horizon, especially in the secondary and distressed market but shoppers looking for VS1/F/Ideal’s may have a tough time finding goods at all, much less finding them on sale.

Neil Beaty
GG(GIA) ICGA(AGS) NAJA
Professional Appraisals in Denver

 

[diagem]

Date: 11/25/2008 1:31:02 PM
Author: JoeNewbie11
Be aware of the source of diamond price predictions on PS or anywhere else. I think the consumer will be hard pressed to get a gloomy prediction from any diamond retailer.

Well, it realy depends how far you are willing to look into the future...

--- There where no significant "new" Diamond mine discoveries in the last 15+/- years....
--- Existing Diamond mines will not produce Diamonds for ever, and some are/did closed down and some (of the significant ones) are showing signs of depletion...
--- if no new Diamond mines are discovered in the near future combined with middle class natural growth in emerging markets (far East) will cause demand to way overpass supply.
--- Banks admit most cutting centers debts are within acceptable low risk range = Diamonds are in strong financial hands, from miner to retailer...

Sure you might find signs of panic here and there with some retailers (as with every other retail segment)..., so it might be to the consumers advantage to "try" their luck negotiating at this near term stage..., but, I am with Paul and dont see a systematic price drop at the retail level...

 

[Dancing Fire]

Date: 11/25/2008 3:17:31 PM
Author: DiaGem

Date: 11/25/2008 1:31:02 PM
Author: JoeNewbie11
Be aware of the source of diamond price predictions on PS or anywhere else. I think the consumer will be hard pressed to get a gloomy prediction from any diamond retailer.

Well, it realy depends how far you are willing to look into the future...

--- There where no significant ''new'' Diamond mine discoveries in the last 15+/- years....
--- Existing Diamond mines will not produce Diamonds for ever, and some are/did closed down and some (of the significant ones) are showing signs of depletion...
--- if no new Diamond mines are discovered in the near future combined with middle class natural growth in emerging markets (far East) will cause demand to way overpass supply.
--- Banks admit most cutting centers debts are within acceptable low risk range = Diamonds are in strong financial hands, from miner to retailer...

Sure you might find signs of panic here and there with some retailers (as with every other retail segment)..., so it might be to the consumers advantage to ''try'' their luck negotiating at this near term stage..., but, I am with Paul and dont see a systematic price drop at the retail level...

LOL!!! Far East ? haven''t you heard China been closing factories everyday.

 

[Dancing Fire]

Date: 11/25/2008 1:31:02 PM
Author: JoeNewbie11
Be aware of the source of diamond price predictions on PS or anywhere else. I think the consumer will be hard pressed to get a gloomy prediction from any diamond retailer. It''s like asking the Home Building Industry or National Association of Realtors will housing prices continue to fall for the next 2 - 3 years (most of them say prices will bottom by mid-2009 in the US, which is ridiculous by the way).

The world is in a deflationary period now, which is good for the consumer, but bad for the retailer. Why buy today, when it will be cheaper tomorrow? This goes for homes, cars, gas, and many other commodities/purchases.

I am no diamond expert, but I understand this. Demand dictates price. Affordability dictates demand. Income/Credit dictates affordability. Jobs dictate income/credit. Credit is difficult to come by now, whether it be credit cards or HELOCs, this source of purchasing power has been diminished as a result of the credit bubble bursting (just read about the US Federal Govt. extending the bailout to credit cards, student loans, car loans, etc. because the credit industry doesn''t trust the consumer to pay back their debts). The other side of the purchasing power equation is incomes. US wages have been on average stagnant for the past 8 years, while commodities have risen, this reduces the consumer''s purchasing power. Stock portfolios have taken a huge hit and even the well-to-do are reducing their discretionary spending. Lastly, the unemployment rate is increasing rapidly. Remember, when companies anounce they''re laying off 10-15% of their workforce, this is not just direct labor, this is also indirect labor (managers, directors, executives, etc.) and these people are the ones who have extra income for diamond purchases. When the question on people''s mind is ''Will I have a job tomorrow?'', you can be sure people will cut back their discretionary spending, which includes diamond purchases.

My advice to the consumer, which will be unpopular with the retailers, is to wait if you can.

agree with you 101%

 

[Garry H (Cut Nut)]

Date: 11/25/2008 2:27:15 PM
Author: strmrdr

In the mean time here is a chart showing what happened up to 10/27/2008 on dec 1st we need to talk Andrey into making an updated one.

edited
already answered

 

[diagem]

Date: 11/25/2008 8:47:10 PM
Author: Dancing Fire

Date: 11/25/2008 3:17:31 PM
Author: DiaGem

Date: 11/25/2008 1:31:02 PM
Author: JoeNewbie11
Be aware of the source of diamond price predictions on PS or anywhere else. I think the consumer will be hard pressed to get a gloomy prediction from any diamond retailer.

Well, it realy depends how far you are willing to look into the future...

--- There where no significant ''new'' Diamond mine discoveries in the last 15+/- years....
--- Existing Diamond mines will not produce Diamonds for ever, and some are/did closed down and some (of the significant ones) are showing signs of depletion...
--- if no new Diamond mines are discovered in the near future combined with middle class natural growth in emerging markets (far East) will cause demand to way overpass supply.
--- Banks admit most cutting centers debts are within acceptable low risk range = Diamonds are in strong financial hands, from miner to retailer...

Sure you might find signs of panic here and there with some retailers (as with every other retail segment)..., so it might be to the consumers advantage to ''try'' their luck negotiating at this near term stage..., but, I am with Paul and dont see a systematic price drop at the retail level...

LOL!!! Far East ? haven''t you heard China been closing factories everyday.

Yep..., heard it..., but you cant go against the numbers..., China is still expected to show a 6-8% growth...., even after all those closures...

DF..., its very simple..., and it is math....

 

[Imdanny]

What I read is that China is on the verge of an unemployment crisis. It doesn't sound very good to me. I would think that in a world financial crisis prices will eventually fall. So put me that column.

 

[edl]

China may be closing factories, but only because those owners are moving them to Vietnam. Expect huge growth there in the next five years.

To the OP - if you're looking to buy in the next few months, start shopping now. It takes awhile to find the right stone. Besides, you already found Pricescope, so congratulations - you'll be getting a better price than the average non-Pricescope shopper.

 

[strmrdr]

My opinion if you need or really want a stone get one... if your just sorta shopping then consider waiting a month and see what happens.
But I wouldn''t put off getting a Christmas gift or E-ring because prices might go down next month or 2 months down the road unless it was over 3ct then I would very strongly consider waiting.

 

[Dancing Fire]

Date: 11/26/2008 12:23:30 AM
Author: DiaGem

Date: 11/25/2008 8:47:10 PM
Author: Dancing Fire

Date: 11/25/2008 3:17:31 PM
Author: DiaGem

Date: 11/25/2008 1:31:02 PM
Author: JoeNewbie11
Be aware of the source of diamond price predictions on PS or anywhere else. I think the consumer will be hard pressed to get a gloomy prediction from any diamond retailer.

Well, it realy depends how far you are willing to look into the future...

--- There where no significant ''new'' Diamond mine discoveries in the last 15+/- years....
--- Existing Diamond mines will not produce Diamonds for ever, and some are/did closed down and some (of the significant ones) are showing signs of depletion...
--- if no new Diamond mines are discovered in the near future combined with middle class natural growth in emerging markets (far East) will cause demand to way overpass supply.
--- Banks admit most cutting centers debts are within acceptable low risk range = Diamonds are in strong financial hands, from miner to retailer...

Sure you might find signs of panic here and there with some retailers (as with every other retail segment)..., so it might be to the consumers advantage to ''try'' their luck negotiating at this near term stage..., but, I am with Paul and dont see a systematic price drop at the retail level...

LOL!!! Far East ? haven''t you heard China been closing factories everyday.

Yep..., heard it..., but you cant go against the numbers..., China is still expected to show a 6-8% growth...., even after all those closures...

DF..., its very simple..., and it is math....

math ?? they couldn''t buy a nice 1ct diamond with their annual salary. my guess....chinese factory workers make less than $4,000 USD annually.

 

[diagem]

Date: 11/26/2008 1:27:48 AM
Author: strmrdr
My opinion if you need or really want a stone get one... if your just sorta shopping then consider waiting a month and see what happens.
But I wouldn''t put off getting a Christmas gift or E-ring because prices might go down next month or 2 months down the road unless it was over 3ct then I would very strongly consider waiting.

IMO..., the opposite is more likely...

The near term might (just might

) be a good time to try to negotiate a more attractive price for the larger Diamond segment.
You might get lucky and find a jeweler who is in the "panic mode" reflecting the current economic situation ...

But as I see (a bit) further down the road..., rarity will prevail! The larger = the rarer

.

 

[diagem]

Date: 11/26/2008 1:50:13 AM
Author: Dancing Fire

Date: 11/26/2008 12:23:30 AM
Author: DiaGem

Date: 11/25/2008 8:47:10 PM
Author: Dancing Fire

Date: 11/25/2008 3:17:31 PM
Author: DiaGem

Date: 11/25/2008 1:31:02 PM
Author: JoeNewbie11
Be aware of the source of diamond price predictions on PS or anywhere else. I think the consumer will be hard pressed to get a gloomy prediction from any diamond retailer.

Well, it realy depends how far you are willing to look into the future...

--- There where no significant ''new'' Diamond mine discoveries in the last 15+/- years....
--- Existing Diamond mines will not produce Diamonds for ever, and some are/did closed down and some (of the significant ones) are showing signs of depletion...
--- if no new Diamond mines are discovered in the near future combined with middle class natural growth in emerging markets (far East) will cause demand to way overpass supply.
--- Banks admit most cutting centers debts are within acceptable low risk range = Diamonds are in strong financial hands, from miner to retailer...

Sure you might find signs of panic here and there with some retailers (as with every other retail segment)..., so it might be to the consumers advantage to ''try'' their luck negotiating at this near term stage..., but, I am with Paul and dont see a systematic price drop at the retail level...

LOL!!! Far East ? haven''t you heard China been closing factories everyday.

Yep..., heard it..., but you cant go against the numbers..., China is still expected to show a 6-8% growth...., even after all those closures...

DF..., its very simple..., and it is math....

math ?? they couldn''t buy a nice 1ct diamond with their annual salary. my guess....chinese factory workers make less than $4,000 USD annually.

Df..., your too narrow-minded..., think a bit further...

 

[Dancing Fire]

so now you wanna talk about corruption money?

 

[strmrdr]

Date: 11/26/2008 3:01:04 AM
Author: DiaGem

Date: 11/26/2008 1:27:48 AM

Author: strmrdr

My opinion if you need or really want a stone get one... if your just sorta shopping then consider waiting a month and see what happens.

But I wouldn't put off getting a Christmas gift or E-ring because prices might go down next month or 2 months down the road unless it was over 3ct then I would very strongly consider waiting.

IMO..., the opposite is more likely...


The near term might (just might

) be a good time to try to negotiate a more attractive price for the larger Diamond segment.

You might get lucky and find a jeweler who is in the 'panic mode' reflecting the current economic situation ...


But as I see (a bit) further down the road..., rarity will prevail! The larger = the rarer

.

long term you are likely correct but that doesn't help people over the next 2 to 3 months to decide.

 

[just looking]

Joe,

First of all I agree with 100%. However, diamonds ( I am not a diamond expert)are a commodity which is dictated by price in many ways. For instance, take a look back at historical prices during the 70''s, talk about prices in an unstable time with high fuel prices ,unemployment and a deep recession.

It will be interesting to see what happens with diamond prices considering todays tryng times but I would say the future is unpredictable at this point in time.

Regards,

 

[diagem]

Date: 11/26/2008 9:47:45 AM
Author: strmrdr

Date: 11/26/2008 3:01:04 AM
Author: DiaGem

Date: 11/26/2008 1:27:48 AM

Author: strmrdr

My opinion if you need or really want a stone get one... if your just sorta shopping then consider waiting a month and see what happens.

But I wouldn''t put off getting a Christmas gift or E-ring because prices might go down next month or 2 months down the road unless it was over 3ct then I would very strongly consider waiting.

IMO..., the opposite is more likely...


The near term might (just might

) be a good time to try to negotiate a more attractive price for the larger Diamond segment.

You might get lucky and find a jeweler who is in the ''panic mode'' reflecting the current economic situation ...


But as I see (a bit) further down the road..., rarity will prevail! The larger = the rarer

.

long term you are likely correct but that doesn''t help people over the next 2 to 3 months to decide.

Why? For larger Diamonds? Now might be the time.

 

[psadmin]

Here is the December Update for 2008. You can always see the updates here

https://www.pricescope.com/community/threads/price-hike-a-hype.15538/page-3

 

[strmrdr]

Thank you Andrey.
Not a lot of movement in the smaller sizes but some.
It pretty much reversed the DeBeers price increase of earlier this year so far.
It has a way to go to reverse the speculation increase on the larger sizes.

 

[Richard Sherwood]

Diamonds tend to surprise people in tough economic times.

Everybody expects them to go down, but there is a market pressure that comes to bear when many people are looking to put their money into tangible assets when every thing else is going down the toilet.

You could have your money in a lot worse things than a fine quality diamond at this time, in my opinion.

 

[diagem]

Date: 12/3/2008 8:37:35 PM
Author: Richard Sherwood
Diamonds tend to surprise people in tough economic times.

Everybody expects them to go down, but there is a market pressure that comes to bear when many people are looking to put their money into tangible assets when every thing else is going down the toilet.

You could have your money in a lot worse things than a fine quality diamond at this time, in my opinion.

I agree Richard..., and (so far) a lot of the facts are with us...

Just an example: http://www.idexonline.com/portal_FullNews.asp?SID=&id=31578


"IDEX Online Research: Diamond Prices Hold Up While Jewelry Commodities Fall

(December 3, '08, 1:46 Ken Gassman)

Diamantaires may be complaining that polished diamond prices are softening, but diamonds have been the “place to be” in today’s uncertain economic environment. IDEX Online Research compared polished diamond price performance over the past year to other jewelry commodities – gold, silver, platinum – and the U.S. stock market as measured by the S&P 500, a broad market indicator.

Diamonds are the only commodity used in the jewelry industry with prices that are still above last year’s level. When compared to the U.S. stock market, diamonds have dramatically outperformed equities.

The graph below compares twelve-month price changes for major jewelry commodities and the U.S. stock market to diamond prices."

 

[strmrdr]

Not for consumers they arent.
The margins are to high on both sides of the deal for consumers.
Gold/Silver/Plat bullion works because consumers can buy and sell near spot.

 

[Dancing Fire]

Date: 12/4/2008 12:49:01 AM
Author: DiaGem

Date: 12/3/2008 8:37:35 PM
Author: Richard Sherwood
Diamonds tend to surprise people in tough economic times.

Everybody expects them to go down, but there is a market pressure that comes to bear when many people are looking to put their money into tangible assets when every thing else is going down the toilet.

You could have your money in a lot worse things than a fine quality diamond at this time, in my opinion.

I agree Richard..., and (so far) a lot of the facts are with us...

Just an example: http://www.idexonline.com/portal_FullNews.asp?SID=&id=31578


''IDEX Online Research: Diamond Prices Hold Up While Jewelry Commodities Fall

(December 3, ''08, 1:46 Ken Gassman)

Diamantaires may be complaining that polished diamond prices are softening, but diamonds have been the “place to be” in today’s uncertain economic environment. IDEX Online Research compared polished diamond price performance over the past year to other jewelry commodities – gold, silver, platinum – and the U.S. stock market as measured by the S&P 500, a broad market indicator.

Diamonds are the only commodity used in the jewelry industry with prices that are still above last year’s level. When compared to the U.S. stock market, diamonds have dramatically outperformed equities.

The graph below compares twelve-month price changes for major jewelry commodities and the U.S. stock market to diamond prices.''

buying diamonds is like buying a brand new car. the consumer lose 25% as soon as they own it.

 

[CCNZ]

Many,many,many other things to put your money into during times like these than diamonds, especially as a retail customer who is paying full retail.

Maybe wholesalers can do ok but I cant imagine a consumer would go out and buy a few retail diamonds at all.

About this downturn I know several people who are deferring spending any money on engagement rings in the near future as job security and a whole raft of other issues are on most peoples doorstep.

Spending a big chunk of saving s right now on an ER is very brave