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Price Hikes as Demand Exceeds Supply in Diamond Trade

  • De Beers is only one of those diamond auctions, there exist thousands of diamond businesses all over the world and the price increase is common to them all. What used to be termed a very conservative trade is now being called for worldwide.
By HT Brand Studio
PUBLISHED ON JUL 07, 2021 08:22 PM IST

About two years ago, diamond trade slipped into what could be termed a near decline. Diamond values dropped significantly and some businesses in the sector were on the verge of going down. This was further worsened by the pandemic in 2020 as several businesses were shut and restrictions placed to combat the spread of the coronavirus.

Today, what is experienced in the global diamond trade is the direct opposite. It is a total bounce back from the sector's lowly position to a state that is now characterized by an increase in demand for diamonds and as a result, an increase in diamond price.

Immediately COVID-19 and its stay home effect eased, diamond business took on a whole new outlook with sporadic demand from buyers and a rise in diamond prices and value across the world. At the latest auction for diamonds by De Beers, it was discovered that the price of the gem had increased by 10% since the last auction. Surprisingly, the diamonds were not only sold out but also resold to other traders who bought them at another price 10% more.

De Beers is only one of those diamond auctions, there exist thousands of diamond businesses all over the world and the price increase is common to them all. What used to be termed a very conservative trade is now being called for worldwide. The competition is high and both traders and consumers alike have shown themselves willing to pay the price.

From Increase in Demand to Shortage in Supply, Reasons for the Hike in Diamond Price

Because the increase in demand was spontaneous, scarcity crept into the market chain too early. With a shortage in supply, diamond value was bound to increase and trade become more competitive. What this did was to drive a stronger sense of urgency in wholesalers and retailers of diamonds. They needed to buy more to save their businesses and ensure the scarcity did not catch up with them. Again, this resulted in more demand for rough diamonds, increasing the price hike frenzy already in diamond trade across the globe.

We have observed major retailers of diamonds, especially in countries like the US and China buying hugely to be able to keep up with sales and avoid scarcity. Meanwhile, the sources for diamonds are now scarce and the huge wholesalers of rough and refined diamonds barely have the supply to keep up with the demand from retailers. Thus, the situation is now a cycle, a ripple effect that keeps sustaining the high fees now placed on an average diamond as compared to just a couple of months ago.

One would be tempted to conclude the recent price increase to be the direct influence of diamond traders such as retailers and polishers alone. However, there has been a very noticeable increase in the demand for diamonds from consumers as well. Of course, why would retailers need to buy more if consumers were not demanding it?

All stages of the market chain have not been left out. At the moment, it does not matter whether the stones are cut or uncut, polished or yet to be polished, natural or synthetic diamond.

What Effects can Price Hike pose on Diamond Trade?

The new trend in the diamond industry is so obvious that everyone who cares to know about what happens in the sector is talking about it – the media, economists, enthusiasts, and the masses. Some are elated and intrigued by the huge comeback in only a matter of months while some are worried about what dangers this could bring to the sector.

The Good

The increase in price and demand experienced in the diamond business all over the world could mean many positive things for the industry if handled properly.

For one, it could drive healthy competition and improvisation in the techniques for bringing rough diamonds to polished and finished products.

As it appears that the price hike will not climax anytime soon, it might also pose huge opportunities for investors. With the current trend, diamond prices should still be expected to increase and those who buy now are putting themselves on the positive side on the profit margin when they sell-off in the nearest possible future.

The government of Russia for example is looking to bring on sales from the state repository to anyone who will be willing to bid and buy. They have their reserves at this time and are taking opportunity of the market situation to make massive profits.

The Bad

Considering the recent closure of most luxury activities due to the COVID-19 activities, it is not surprising that buyers of finished diamond products resorted to a buying frenzy immediately after the pandemic. With outings and ceremonies beginning to happen after a long time of staying indoors, people needed to show up fancifully and diamond jewelry serve just well in that regard.

While this “enthusiastic buying” should still continue in the meantime, there are concerns that demand by consumers may begin to wane as customers begin to seek something new and different to flaunt. After all, we exist in a world where there are bound to be trends that exist only for a while until other things supposedly more fanciful come along to sweep the trends off.

More so, as more luxury providing hubs that have been previously shut down begin to open up, there is set to be divided attention on the part of customers for diamonds. For example, as international travel, tourism, and hospitality services become possible again across the world, demand for diamonds could drop as consumers now have more diversity to spend on.

With an increase in price and demand come issues of greed, sales point boycotts, and infiltration of the market with fake products. If proper care is not taken, the diamond price hike can cause a surge in sales of diamonds through black markets and many are likely to fall victim to buying fake, substandard, or misrepresented diamonds.

While there is a lot of skepticism on what could happen next to diamond trade after this, one can’t deny that there is indeed a huge demand for diamonds that has not been reported in a long while before now. Perhaps, the industry is making history and diamonds are truly as they are called: “the classic evergreen”.

Disclaimer: This is a company press release. No HT journalist is involved in creation of this content.

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