Consumers should expect higher diamond prices as strong demand has been driving them up in recent months. After consumer retail purchases dropped in March and April, US retail activity surged in the summer months. This renewed demand includes jewelry and diamonds and is causing diamond prices to rise.
Jewelry Sales Shoot Up
The COVID-19 pandemic led to a deep plunge in jewelry sales in March and April, with a recovery starting in May. That positive change developed into an exceptional rise in jewelry sales during the summer months, straight into the holiday season.
This surge is not completely surprising. Historically, consumer demand for jewelry rises early and sharply following periods of deep economic concern and national fear. Consumers have a preference for lasting items with clear emotional value such as diamond jewelry in response to the uncertainty of such times.
Expect Higher Diamond Prices
The revival in consumer jewelry purchases has led to a rise in demand for loose diamonds by jewelry manufacturers and retailers in the US and China. This, in turn, has led to a strong jump in the wholesale transaction prices of diamonds.
Even prior to the lockdowns, consumer demand focused on a limited range of diamonds. As diamond polishing activity grinded to a halt, goods in continued demand became scarce, if not completely unavailable.
Strong Demand Drives Diamond Price Recovery
The renewed rough diamond supply and reopening of polishing facilities has offered fresh polished diamonds to the market. However, this came somewhat late for the holiday season, with demand outdoing supply. And it is why we should expect higher diamond prices in November and December.
Naturally, polished diamonds in higher demand had the most price increase. Diamonds weighing one carat and less led the price hikes, up a high single digit in the last three months, according to the polished diamond price index. Larger diamonds up to 2 carats increased in the mid-single digits during the period.
One noteworthy event expected to have a positive impact on demand is the result of the US presidential election. The majority of US jewelry sales are in large metro areas, where President-Elect Joe Biden did especially well. When “your” candidate succeeds, it gives voters a positive outlook, and their likelihood to spend increases.
Holiday Season Forecast
Based on the overall rising trajectory in jewelry sales, feedback from retailers, consumer demand for “more but lasting”, and the US presidential election results, we expect very positive US holiday jewelry sales.
Alongside that, we expect higher diamond prices as well, with consumers finding that gifting luxury goods and splurging on bridal items a comforting reward for making it through the pandemic.
A social issue that may stand in the way is a possible widespread sentiment that flashy products may feel wrong to buy when so many in our social circle may have been hurt by the pandemic.