Daily Management Review

Diamonds are 29% Cheaper than a Year Ago, Fall in Global Prices of Other Jewels


Diamonds are 29% Cheaper than a Year Ago, Fall in Global Prices of Other Jewels
With prices for the gemstone down as much as 29 percent since last year, it is perhaps time for a splash on some investment jewellery.

As the Chinese stock market slump hit discretionary spending and jewellery demand in China driven by a clampdown on luxury gift-giving and a slowdown in the second largest economy of the world, there was a softening of diamond prices, specifically since August.  

According to data made public very recently from the Rapaport Group, a body supporting the international diamond trade, the prices for benchmark 1-carat (0.2 gram) diamonds fell by 0.9 percent in August along with a drop of 1.7 percent in the price of the cheaper 0.30-carat diamonds.

The Rapaport Group claims that the August slide in the price of diamond is part of a longer-term trend where the price of 1-carat diamonds and 0.30-carat diamonds have declined by 12.9 percent and 29 percent over the last 12 months.

"Polished diamond prices continued to slide in August. Fewer dealers bought inventory and those with money waited for lower prices. A slump in global stock markets further dampened sentiment as the outlook for luxury spending diminished along with shareholder wealth," said Rapaport in its monthly report.

slowdown in China's economy, coupled with Beijing's clampdown on expensive gift-giving among officials and the devaluation of the yuan, would prove an additional restraint on discretionary spending, even if

August's slide in stock markets proves isolated, Rapaport warned .
"While expectations from the Hong Kong Jewellery and Gem Fair in September are relatively low, dealers are pinning their hopes on holiday demand to stem the downtrend in polished prices that recurred in August," the report said.

The slide in diamond prices have already started taking their toll in a wide spread manner. A couple of days ago Reuters reported that the slide in prices over the last one year resulted in 5,000 diamond polisher losing their jobs in India's diamond capital of Surat since June this year. The international news wire also reported that nearly half a dozen large diamond companies in the city have had to close down their shops.

"Earnings (in Surat) have fallen, as a majority of workers who are employed on a contract basis process fewer stones put through for manufacturing," Rapaport said in its report on Wednesday.

In August, the Coutts Index of “passion” investments reported that jewellery returned an average of 1.9 percent in 2014. This trumped the return on watches, fine wines and trophy properties, although it was dwarfed by the 40 percent averaged on a "classic" car investment. 

With precious metals prices falling across the board as part of a broad-based decline in commodities, in 2015 the jewellery investors may be less lucky. The prices of spot gold, silver and platinum have declined by 11 percent, 24 percent and 29 percent respectively in the last one year.

The price slide in jewels is creating dents in the global jewellery companies. The second-quarter earnings and sales of Tiffany & Co were below expectations. Even with the strength of the US dollar, the US luxury retailer had a 7 percent fall in the worldwide sales.

The revenues for De Beers, the world-leading diamond producer, recorded a 21 percent decline in its revenue in the first six months of 2015 that clocked $3.0 billion. In the same period last year the diamond merchant had moped up $3.8 billion in revenue.