Wholesale polished diamond prices declined in February as COVID-19 continued to spread around the world, leading to a near halt in demand in China. The decline follows a small resurrection that was fueled by good consumer demand in December.
After it hurt Chinese New Year’s spending, the virus also had a strong negative effect on Valentine’s Day sales in China. In addition to the virus spreading, the stock markets tanked in the second half of February, adding consumer economic worries to health concerns.
Yet, the issues were not limited to external forces. Polished diamond prices were also impacted by the oversupply of rough diamonds in January. The more than $1 billion worth of goods was more than the diamond midstream could digest, fueling concerns among manufacturers.
Polished Diamond Prices Decline 2.9%
Wholesale prices of larger goods were hit hard in February. One-carat round diamonds fell 5%, followed by 2-carat rounds, which declined 3.7%, based on manufacturers’ wholesale transaction prices.
On average, wholesale polished diamond prices decreased 2.9%, with only 0.30-carat goods bucking the trend, selling on average for 1.6% more than in January. In the past five years, wholesale polished prices have been declining, with the occasional price increase, as can be seen in the polished diamond price index. Was the 1.4% price increase in January just another short-lived bounce? Possibly.
The Writing on the Wall
The decline in polished diamond prices does not exist in a vacuum. The issues in China are clear, and the drop in consumer demand caused a major loss of business for wholesalers that cater to the Chinese market.
As noted last month, in response to the decline in inventory and rising demand, wholesalers increased their rough diamond purchases. This raised concern that this could be the start of another vicious cycle of available money, followed by exaggerated rough diamond demand, then rising rough diamond prices, and oversupply of polished diamonds, leading to the inevitable polished diamond price fall. That price drop came in fast – faster than expected.