Diamond Prices Soften in September
The global polished diamond markets were a relative oasis of calm and tranquility amid a roiling sea of turmoil in the world’s financial markets during September. Global stock and commodities prices rose and fell like a yo-yo, but diamond prices remained relatively stable, with only a slight downward drift during the month.
During September, polished diamond prices were down 0.5 percent (one-half of one percent) from the average polished prices during August 2008. On a year-over-year basis, average prices for polished diamonds were 14.0 percent higher in September 2008 versus the same month a year ago. The year-over-year diamond price increase represents a modest deceleration which has been occurring for the past few months.
What kept the diamond trading markets insulated and stabilized from the tumultuous activity in the other commodity and stock markets? It is still a closed market, where traders remain relatively calm, even under the most adverse circumstances. Diamond traders are different from other commodities traders: they have a personal attachment to their product, often a result of family heritage. They understand the market and the product. They have a sense of responsibility to maintain an orderly market, even if demand and supply are out of balance.
But, we hasten to note, the orderly diamond trading markets won’t always be insulated from the foibles of the global financial markets, especially if diamonds and diamond funds begin trading on those financial markets. In our opinion, diamond prices would have been whipsawed up and down during the month, just like other commodities and stocks, if they had been traded on global financial markets.
While polished diamond prices appear to have held more or less stable, September was a challenging month for polished diamond dealers. Trading activity slowed, especially among stones in the three-to-five carat range. Dealers did not want to drop their prices for these larger stones. However, rather than take lower prices, most dealers chose to hold onto their larger, better quality stones; they anticipate that in a year or so, prices will firm up.