Polished diamond prices declined by another 0.8% in July 2017 compared to the prior year, according to the Mercury Diamond Global Tracker™ (MDGT™), an index of polished diamond transaction prices. This is the 32nd consecutive month that the index has declined year-over-year. The last time the index showed an upward year-over-year trend was November 2014.
Prices Are Declining Overall
During the 32-month period, the index declined 11.9%, underscoring the continued softness of the polished diamond market. On a month-over-month basis, prices declined 0.3% during the month of July compared to June.
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 is aimed at serving the wholesale market first and foremost.
The year-over-year rate of decline in July represents a decrease over June, when prices declined 0.6%. The long-term trend indicates an easing in the rate of decline. In the past year, the rate of decline was often in excess of 2%, and at times as much 3.7-4%. However, in recent months the rate shrank to less than 2%.
It is too early to determine whether this is a change in the recent trend. Most of the trading centers took their summer vacations during July. As we published in the last two weeks, the level of demand across major trading centers is relatively low, while inventory is piling up. These trends support this price softening.
The polished price decline trend started in December 2014, and has been running continuously since then. Overall polished diamond prices peaked in July 2011, and declined until October of that year. They recovered, and then declined again for a number of months, until June 2014. Starting in August 2014, overall polished diamond prices softened steadily.
Although on a month-over-month basis MDGT™ rose several times during the past two years, most recently during March, the month-over-month decline in July is not an exception, but rather has become the norm in recent years. Price changes are more volatile on a month-over-month basis, which reflects seasonal changes neutralized in year-over-year comparisons. This volatility has been growing since the start of the year.
All Sizes are not "Dazzling"
The overall price trend is downwards, and no size showed any signs of recovery. Generally, rounds smaller than 1 carat in colors D-M, clarities IF-SI2 showed a deeper decline than larger size rounds during the month of July. For sizes smaller than one carat, this is the opposite trend to the one we saw during June.
Prices of one-carat diamonds fell 0.8 percent during the month, a slower rate of decline than the 1.5% price drop they experienced during June. 1.5-carat rounds suffered the most extreme decline in price, sinking by 2.8%. The price decline in larger goods has also impacted 5 caraters, for which buyers paid 1% less during June.
The year-over-year overall decline in prices is comprised of smaller components, namely the individual performance of a wide range of goods. It is therefore no surprise that on a year-over-year basis, every size range declined in price, many in the mid-single digits. The most notable price declines were halves, three quarters, 1, 1.5, 3, and 5 carats, whose year-over-year price decline is 5% or more.
The long-term overall weakness in polished diamond prices is an ongoing issue, and despite our cautious optimism expressed earlier this year, the price outcome in June and July paints a negative and gloomy picture of the market. Even after taking the "quiet season" into consideration, this ongoing trend should concern us all.
The ongoing decline in prices, and the decline in consumer demand that it reflects, is not a one-way street. For some time, we have been urging the diamond industry to invest in marketing in order to drive consumer demand. Expanding our focus from a single channel to a dual channel may have a positive impact as well. To date, diamonds have been promoted as a symbol of love, set in jewelry. We are urging the diamond community to add a second channel, that of polished diamonds as an asset with the potential of appreciation. Adding this additional venue, where diamonds are traded openly, transparently, and with full and wide disclosure, has the potential to improve our cash flow, and to expand both the number of polished diamond buyers and the frequency of trading.
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 research in the market, 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 the 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 4 accounting firms, and that firm continues to audit the price list monthly. The pricing system is in the process of obtaining a patent in the United States. Traders will not only find the current transaction price of each diamond; by applying their manufacturing costs, they can also “reverse engineer” to calculate the cost of rough diamonds.
Currently, we 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 provide it to you with the hope that you will consider using it regularly.