Polished Diamond Prices Rise in January

Polished Diamond Prices Rise in January 2020 - featured image

Wholesale polished diamond prices rose in January in response to improved demand and lower wholesaler inventories. The rise in wholesale polished diamond prices started in December, as wholesalers witnessed a late rise in demand from US retailers.

Polished Diamond Prices Rise 1.4%

After a year of slow jewelry demand, subsequently hurting demand for diamonds from wholesalers, US jewelry sales popped up 4.4% in December, according to the US Department of Commerce. Wholesale prices of 1-carat round diamonds rose 3.7% in January, based on manufacturers’ wholesale transaction prices.

A graph showing month over month percent change in round polished diamonds - November, December 2019, January 2020

On average, wholesale polished diamond prices have increased 1.4%, with only one size range, 0.70-carat goods, posting a decline compared to December 2019. The recent rise in prices caps five years of waning prices that were preceded by tumbling prices between mid-2011 and early 2015.

Graph showing changes in Polished Wholesale Diamond Prices Jun 2019-Jan 2020
Not an Evolution, But a Revolution

In response to the decline in inventory and rising demand, wholesalers have increased their rough diamond purchases, which are expected to fuel manufacturing activity. 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 diamond leading to the inevitable polished diamond price fall.

The diamond industry is going through major changes that cannot be simply described as an evolution. “Revolution” is a term that better describes the changes: a drop in bank financing that has forced a growing reliance on self-financing, a far more streamlined manufacturing process, the exiting of many mid-size trading companies that did not add value, and a growing understanding that sticking to “this is how we always did it” is no longer a viable business mantra.

If this is the start of a more cautious approach, than these vicious overbuying/stuck with oversupply cycles will be averted.

US Consumer Purchases Came In Late

After a first half of declining sales, US jewelry sales started to rise in July, giving hope that the second half of 2019 will be a great one. It wasn’t.

Despite rising sales during the summer and a sharp rise in sales in September, post-Thanksgiving sales were lukewarm. Consumers snubbed jewelry in October and November. It wasn’t until the very last minute that American consumers returned to stores and bought jewelry.

The 4.4% rise in sales may seem impressive, but on an annual basis, jewelry sales increased a small 0.7%, not even beating the US inflation rate of 2.3%. In real value, jewelry sales fell year over year. Overall, US jewelry sales are estimated at $63.75 billion in 2019.

A graph showing year over year % Change US monthly Jewelry Sales-2019

In the past 15 years, US jewelry sales rose on average 1.8% nominally. The subdued sales in 2019 are a reflection of a cultural change in tastes and needs that the jewelry industry at large, retailers in particular, have not yet adapted to. Urgent attention is needed.

A graph showing year over year percent Change in US Jewelry Sales - 2005-2019

This can include serious deep dives investigating consumer desires, quicker response to in-store demand, and investment in high quality pipeline analytics that, at the very least, would point to changes in retailers’ inventories that indicate early on what consumers are buying and interested in. Agility and a quick response on the part of manufacturers, which they are capable of, would do wonders to improve consumer interest and the pipeline’s bottom line.

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