Diamond Market Update (July 19, 2012)

Macroeconomic conditions are weighing on the diamond market and sentiment is expected to remain weak. There is no true consensus on when conditions are expected to improve. Activity largely stalled in June and some market participants are reportedly awaiting the end of summer. Others are not expecting any significant improvement for the rest of the year.

In June and throughout the first half, polished diamond prices have continued to soften. Year-on-year (y/o/y) many categories of diamonds have seen double-digit price declines for the period up to July.

One-carat diamonds, for example, were down 1.6 percent in June, 3.6 percent for H1 2012, and 13.7 percent y/o/y when compared to H1 2011.

Three-carat diamonds were down one percent in June, five percent for H1, and 13.7 percent y/o/y for H1.

Melee diamonds had performed well in the first quarter but in Q2 even these prices slid.

There is steady demand for SI round diamonds and square fancy diamonds. Some reports suggest that there are even shortages in these categories.

With regards to consumer activity, demand in the US is holding up. However, other markets including China and India have seen softening demand.

In a recent interview with Rapaport News, New York Diamond Dealers Club President Rueven Kaufman said he was recently in China and there is still tremendous demand for diamonds.

He points out that the diamond business has always been cyclical and expresses hopes that this is just one of the waves in the cycle.