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After the July declines, polished diamond prices were flat in August. The Mercury Diamond Global Tracker™ (MDGT™) averaged 113.85 in August 2018, up 0.03% over July. This is not unusual behavior for prices in August, a period of limited activity between polished diamond wholesalers. Polished trade is generally very limited, as traders are on their summer vacations. Historically, prices fluctuate very mildly in August, and at times are unchanged.
MDGT™ fluctuated in the first six months of the year. Prices were up in January and February, declined in March, rose again in April and May, then hit the recent mixed activity in June, which was followed by a decline in July and up by a minute 0.03% in August, despite the ongoing decline in trading activity.
While the flat performance of the index is seasonal, it reflects diamond traders’ desire not to rock the boat. They are hesitant about the market, feeling that they lost momentum after the strong performance in the first few months of the year. Now they need to find their footing again. That usually happens at the Hong Kong show in mid-September. Then they tend to raise prices and gauge the market’s reaction. If demand is strong, they keep the higher prices. If, however, buyers show resistance and buy limited quantities, prices start to decline until the right balance is found.
Price Index Flat
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 August, the index was down 0.8% compared to August 2017. 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. This was exhibited mainly in 2016, and continuing into mid-2017. However, in September and October 2017, the gap expanded from 0.5-1% to about 2.7%, which has now narrowed to less than 2%. This level of 2% or less year-over-year declines remains steady since the start of 2018. It remains to be seen if the current <1% will be maintained in the coming months.
On a month-over-month basis, the price index was practically flat, moving up just 0.03% compared to July.
Prices of Smaller Goods Up, Larger Goods Down
The MDGT™ index is composed of the price performance of many different diamonds of many different size ranges, from 1 carat and above. In August, prices of round diamonds weighing 0.30-0.39 carats (thirds) improved, rising 2.8% after three months of price declines. Half carats also rose, adding 0.8% after a brief price decline in July. In six out eight months in 2018, prices of half carats posted a price increase. Both thirds and halves rose on average 0.8% every month in 2018.
The price of two thirds (0.70-0.89-carats) was up again. In August the size range rose 2.0%, a surprising price increase. The three size ranges (thirds, halves and two thirds) rose by about 6% since the start of the year, highlighting that most of consumer demand was in smaller goods.
Prices of most of the larger round goods declined in August, with 1-carat rounds (1.00-1.49-carats) declining 0.8%, 1.50-carats losing 0.9%, and 3-carats declining by 0.4%. However 2-carats fared better, with their prices holding steady, rising by 0.2%.
On a year-over-year basis, price behavior was very different. Last year prices declined sharply in the summer months. As a result, on a year-over-year basis, prices are up nearly across the board. This was true in July 2018 compared to July 2017, and even more so in August 2018 compared to August 2017, as more size ranges exhibited price increases on a year-over-year basis.
On that basis, prices of thirds and one-carat goods are up over 4.5% compared to August 2017, and the prices of 2 and 3 carats are up nearly 4% year-over-year. The prices of most other items are up by 1-2% with one notable exception – 10 carats. This specialty item was down 1.1% year-over-year.
The global diamond market, like most businesses around the globe, was in a summer slumber. Although this is a seasonal trend, a long-term view shows that the sharp price fluctuations of the past few years are gone, and changes are less volatile. We expect to see price changes in September as the market springs back to full activity.
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.