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Polished Diamond Price Index: Year Ends With Mixed Results

Polished Diamond Price Index: Year Ends With Mixed Results

Prices of smaller goods, below one carat, continued to rise in December after increasing in November, responding to rising demand in the consumer market. Larger goods, however, which suffered from price declines in November, experienced a long-awaited revival, rising 1-1.5% in December, according to the Mercury Diamond Global Tracker™ (MDGT™). The MDGT™ index averaged 109.45 in December 2018.

Polished diamond price increases are a typical cyclical trend in November and December, as holiday season purchases drive demand. This year, as in the 2017 holiday season, consumers made their diamond jewelry purchases very late in the season. November was marked by limited demand, with a pick-up taking place only in the last two weeks of December.

This past year, just like the holiday season, suffered from sputtering demand, extreme price sensitivity, and very focused demand for a relatively limited range of goods.

Price Index Keeps Pointing 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. b2ap3_thumbnail_1_20190114-112642_1.png

In December 2018, the index stood at 109.45, down 0.6% from November, and 4.4% year-over-year. The decline in the index reflects the downward trend of polished diamonds weighing 3-carat and above.

Year-over-year, polished diamond prices are far below those of previous years. Since December 2014, the MDGT™ index has declined every December, usually by a lower single percentage point. The 4.4% year-over-year decline in December 2018 is the largest such decline since December 2015, when prices fell a sharp 9.1%. It is also the largest year-over-year decline since June 2016, underscoring the negative trend the diamond industry has been suffering from since mid-2011. The MDGT™ has been showing a negative year-over-year trend since December 2014.

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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 the last quarter of 2018. The year-over-year declines of 2% or less has been steady since the start of 2018. The 2.8% decline in October, followed by the 4.0% decline in November and the further 4.4% decline in December are not positive signs. And while compared to the steep declines of 2012 and 2015, the last quarter seems almost tranquil in comparison. The deepening decline may be signaling that another crisis is ahead for the diamond industry.  

On a month-over-month basis, prices of most round goods below and above 1-carat improved in December, as consumer demand stretched through many categories: from small and delicate designs to bridal jewelry set with large diamonds, from low cost price-point items to high-end/high-priced designs. The surprising exception were the 1-carat rounds, which saw prices ease down 0.3%.

The bounce back of smaller goods started in November. Round diamonds weighing 0.30-0.39 carats (thirds) rose 0.7%, adding to the 2.0% rise in November. Prices of half-carat rounds also increased by 0.7% in December after posting a strong 2.8% rise in the previous month. Another nice price increase was seen for 0.70-0.89-carats, which posted a 1% rise after its prices rose 2.8% in November.

Goods weighing 1.50-carats and larger, which were slow in November and suffered from price declines, fared better in December, posting price hikes of 0.9-1.6% compared to November. These price increases reflect the holiday demand. At first, consumers purchased diamond jewelry items set with smaller goods. They are typically priced lower than those set with larger goods. Deciding to spend more on pricier items seemed to be tougher, leading many consumers to wait until the very last minute to make those purchases. 

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On a year-over-year basis, price behavior was somewhat different: prices of smaller goods and those of 1-carat as well as 2-carat rose. Those of 3-carats and above declined.

Prices of goods below 1-carat were up by over 6% on a year-over-year basis. One-carat goods also did well on that basis, up 2.8%. Prices of 1.5 and 2-carat were up by about 1%, not much for a year’s worth of trading activity. Prices of larger goods declined, closing the year on a disappointing note. 

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Conclusion

The global diamond market did not do well in 2018. Prices of rough diamonds increased overall, and wholesale prices of polished diamonds largely declined. Neither the retail sector, nor the midstream can build a viable business based on mediocre sales in the last two weeks of December. In fact, who can promise any business owner that there will even be business in late December 2019? No one.

The Diamond Producers Association, tasked with generic advertising for the industry, seem to have dropped the ball. Their presence was hardly felt and many doubt it had any meaningful impact on consumer demand during the holiday season. That is a shame, because it is the most important selling period for the diamond industry and is when their support is most needed.

With 2018 behind us, it is now time for the industry to gather its wits and try to generate a turnaround for the industry before LGD devours it whole.

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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 4 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 by applying their manufacturing costs, they can also “reverse engineer” to calculate the cost of rough diamonds.

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.b2ap3_thumbnail_6_20190114-114628_1.png

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.

 

 

 

 

 

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