It’s bad news for jewelry buyers. Diamond, gold and platinum prices are all on the rise.
Twinkling frostily in the jeweller’s window, a diamond may be the very essence of glamour and romance, a symbol of love and lifelong commitment.
However, before they get there, or indeed within a thousand miles of there, the diamonds from which those little shards of heaven are hewn are a commodity, much like any other.
And, much like that of many other commodities, the price of the rough stones has been having it, well, rough this past year. As the chart below shows, the price of polished diamonds started 2016 at its lowest level for five years. Demand has declined sharply in China (we told you this was actually a familiar commodity story) – the second largest consumer of the precious stones after the US.
Diamonds in the rough
Source: Nikkei
Diamond sales at Chinese jewellers are weak. Hong Kong-based bellwether saw its same-store sales down 15% from a year earlier in the October to December quarter of 2015. With its stock price halved in a year, it is mulling the shuttering of unprofitable stores.
Miner Rio Tinto reported diamond revenue slumped 23% to $698 million in 2015 as market conditions drove down rough prices. Lower demand from India and China, higher rough and polished inventory and lower trade manufacturing margins forced prices to dip. Diamond production fell 25% to 17.4 million carats. Rio Tinto forecast output to increase 21% to 21 million carats in 2016, according to a statement February 11.
However, there is a little glimmer in the darkness.
The mining giant Anglo American, which owns DeBeers Group, reckons that this year has got off to a more positive start. De Beers controls somewhere between 30% and 40% of the rough diamond trade and it said sales of these stones generated $540 million (£373 million) during its first sales cycle of 2016, which ended on January 25.
That more than doubled sales of $248 million posted in the last sales cycle of 2015.
De Beers said rough diamond sales rose across the company’s product range thanks to higher demand for polished stones. Solid jewellery sales during the US holiday season helped reduce polished-diamond inventories and boost demand for rough stones, the company said.”
The bad news for Valentines Day is that gold and platinum prices are also on the rise
Source: Thomson Reuters
The combined January-cycle offerings to the retail trade by De Beers and Russia’s Alrosa PJSC, which between them control almost two-thirds of the market, far exceeded expectations – Alrosa adding another $200 millions’ worth to DeBeer’s total. The sales were driven by supply cuts in 2015 that led to shortages this year, lower prices and better-than-expected holiday demand,.
All of the above suggests that the ardent suitor heading out on Valentine’s Day for a stone for his (or her) lover is likely to be paying a little less than they might have on Valentines Day 2015, but a little more than they would have done just a few months ago.
However, the price recovery is not yet certain – financial market ructions elsewhere suggest it may not last. And for all the clarity of its end product, the retail diamond trade can be an opaque business.
There is more bad news for the jewelry buyer, given that those precious diamonds need to be set in something. The market turmoil means prices of precious metals like gold and platinum are on the rise again. Those metals are deemed to be relatively safe assets, and they tend to rise when things like shares are diving.
The gold price started the year at just above $1,000 an ounce, and it’s now trading at about $1,240 an ounce. Similarly, platinum started the year at about $890 an ounce, and is now above $950 an ounce.
