After polished diamond prices declined sharply in September, they took an additional step downwards, though it was not particularly significant. The Mercury Diamond Global Tracker™ (MDGT™) averaged 111.55 in October 2018, down 0.17% from September. While demand for loose diamonds remains slow, we believe traders hardened their stance on price as much as possible in anticipation of rising demand.
October is historically a period of rising demand for polished diamonds by retailers preparing for the November-December holiday season. In the past few years, demand by jewelry manufacturers peaked in September, followed by a minor slide in October. Every October since 2014, overall prices have declined by a few fractions of a percent. In the last five years this month-over-month decline averaged 0.3%, putting this past month’s price declines on the lighter side. This year was unusual due to a deep price decline in September, which may explain the relatively smaller decline in October.
Another issue in the trade-impacting prices is a large inventory, mainly of small size polished diamonds. This oversupply, coupled with the lower demand, has implications for the mid-stream of the diamond pipeline as well as diamond mining companies.
In recent months, we wrote of diamond wholesalers’ need to find their price footing after the summer vacation, often helped by the large trade show in Hong Kong. We can now easily state that as the air cools down and the burning color of the leaves tells us that summer is gone and the fall season is upon us, that the price footing was found, and it is soft. Prices are fluid and tended to move down.
Price Index Points Down
(MDGT™) is based on the transaction prices of diamonds weighing 1-30 carats, collected and used for the Mercury Diamond™ Price List . It provides wholesale polished diamond prices based on transaction prices in the wholesale market, and its primary purpose is to serve the wholesale market.
Year-over-year, polished diamond prices are still below those of the previous year. In October, the index was down 2.8% compared to October 2017. This is the largest year-over-year decline of the index since August 2016. Since December 2014, the index has exhibited continued year-over-year declines.
Although the trend of year-over-year price declines started in December 2014, the steep declines of 2015 appear to be over, and they have since tapered off, until now. The year-over-year declines of 2% or less has been steady since the start of 2018. The 2.7% decline in September, followed by the 2.8% decline in October are not positive for the diamond industry, however compared to the steep declines of the past, recent months seem almost tranquil in comparison.
On a month-over-month basis, prices were down nearly across the board, pulling the index down 0.17% compared to September. However, here we see a moderation in decline compared to the prior month. On a month-over-month basis, price change is usually within a single percent range, often just a fraction of a percent, indicating that the decline is within the norm.
Prices of Smaller Goods Drop
The MDGT™ index is composed of the price performance of many different diamonds of many different size ranges, from 1 carat and above. In September, prices of round diamonds weighing 0.30-0.39 carats (thirds) dropped a dramatic 2.6% compared to August. That was a surprisingly deep decline. This past month, prices of thirds have increased 0.5%, regaining some of their lost value.
From there on up to five-carat, the price of round goods declined. 0.70-0.89-carats posted a dip of 2%, and 1.5-carats lost 2.3%. The price of the rest of the rounds declined to a lesser degree.
On a year-over-year basis, price behavior was very different. Last year prices declined sharply in the summer months and continued to decline until December 2017. As a result, on a year-over-year basis, prices are up nearly across the board. This was true since July 2018 and continues to be so in October.
By the same token, prices of thirds were up 3.4%, and one-carat goods are up 5.7% compared to October 2017, while the price of 3-carat rounds was up just 0.1% year-over-year.
The global diamond market is entering the holiday season with caution. Manufacturers have decreased rough diamond purchases on the one hand, and retailers are just starting to assess consumer holiday purchases. It is fair to expect a certain rise in demand in November, but in October purchases were limited. The declining prices were seasonal, however the jump in the price of thirds is surprising and may indicate that after a slowdown, retailers as well as manufacturers expect consumers in the US to show renewed interest in this item.
About MDGT™ and the Mercury Diamond™ Price List
We have developed a system that collects transaction prices from a wide range of manufacturers, traders and retailers. These many monthly transactions are augmented by constant market research which backs, double checks, verifies and completes the transaction data. The system covers more than 18,000 polished diamond categories across the 4Cs, including polished diamonds weighing up to 30 carats with clarities ranging from Flawless to I3 in colors from D to P and in various shapes.
The price list provides a price for a top stone without any irregularities.There is a separate table of irregularities, which provides the necessary discount or premium to find the exact current price of any particular diamond.
This polished diamond pricing system was reviewed and validated by one of the Big Four accounting firms, and that firm continues to audit the price list monthly. The pricing system is currently in the process of obtaining a patent in the United States. Traders will not only find the current transaction price of each diamond, but can also “reverse engineer” to calculate the cost of rough diamonds by applying their manufacturing costs.
We currently publish the price list monthly, on the tenth of every month. It is also available in the form of a ticker. Take a look at this important alternative, which has the potential to contribute to an important change in the market. Please download the list and test it. We offer it to you with the hope that you will consider using it regularly.
The views expressed here are solely those of the author in his private capacity. No one should act upon any opinion or information in this website without consulting a professional qualified adviser.
Diamond industrialist Ehud Arye Laniado is a man passionate about diamonds. From his early 20s in Africa and later in Belgium honing his expertise in forecasting the value of polished diamonds by examining rough diamonds by hand, till today four decades later, as chairman of his international diamond businesses spanning mining, exploration, rough and polished diamond valuation, trading, manufacturing, retail and consultancy services, Laniado has mastered both the miniscule details of evaluating and pricing individual rough diamonds and the entire structure of the diamond industry. Today, his global operations are at the forefront of the industry, recognised in diamond capitals from Mumbai to Tel Aviv and Hong Kong to New York.