De Beers Announces Price Increases

De Beers in a letter to clients last week said it had increased prices by an average 8.5% since the start of the year, including this week's Sight or sale.
"Overall, the cumulative effect of the Sight by Sight changes to our list prices over the first 4 Sights of 2008 (including the April/May Sight) will have been an average of +8.5%", the letter said.
Rio Tinto and BHP Billiton are also said to have raised price this month, highlighting the continued strength of the rough market.

March Diamond Prices Continue to Rice Sharply

Global diamond prices continued to march upward at an increasing rate in March. On a year-over-year basis, polished diamond prices surged by 8.6 percent, according to IDEX. On a month-over-month basis; March 2008 vs. February 2008; polished diamond prices increased sharply by 2.0 percent. Both of these price increases are the largest since 2004, and they are greater than the record price gains last month.

The sharp price increases in polished diamonds were driven by three-carat diamonds and larger.
While prices for on-half to two-carat stones increased more modestly than the larger stones, it is important to note that all key diamond sizes posted a price increase, year-over-year, in March.

There appear to be five key factors that are driving diamond prices sharply higher:

1. solid demand from most markets, except the U.S. and Japan.
2. rising costs throughout the diamond pipeline.
3. a weakening U.S. dollar, the international currency for the diamond market.
4. a global rise in the price of virtually all commodities which has spilled over into the diamond market.
5. stock market volatility, the last of which has caused some traders to move their wealth into diamonds, precious metals, and other assets that may hold their value, until the financial markets recover.

The big question is this: will these diamond price increases hold at retail, or will merchants negotiate them down?

Even though the U.S. is in a recession, demand from other regions of the world is expected to push diamond prices higher during 2008. As long as the demand for diamonds and diamond jewelry remains strong, especially in emerging markets, prices are expected to rise. Further, since rough diamond prices have been rising faster than polished diamond prices, there is ongoing pressure to pass along those price increases.