A few days ago, I received the following chart from a friend, which led to a very pleasant discussion about diamond prices, current market situation, and future trends.
If we look at some data points of the IDEX Diamond Index, which covers a broader price fluctuation range in one index, between October 2019 and 2024, (2019: 120.72 / 2020: 120.50 / 2021: 130.32 / 2022: 136.50 / 2023: 107.47 / 2024: 95.94) we see an RSI (Relative Strength Index) of just 37. Factor in inflation, and this number falls, indicating an oversold condition, meaning its price has recently fallen significantly and could be due to a potential rebound.
This is an interesting technical analysis of trends, indicating a positive rebound, that has led to the second question:
Instead of price, what is the value of a Diamond?
A question that reminds Philip Fischer’s observation: “The stock market is filled with individuals who know the price of everything, but the value of nothing.”
- Is the Diamond industry experiencing the same? Are individuals in the Diamond industry aware of value or just price?
While diamond prices and discounts are easily accessible, and subject to sentiment and other market conditions, its long-term value does not vary. Nevertheless they are not widely available nor are they properly communicated along the supply chain.
What makes a Diamond valuable?
- Finite supply: For every 200 metric tons of extracted ore, only about 1 carat (0.2 grams) of gem-quality diamond is produced, amounting to a meagre 0.000001% yield. Its whole rough supply amounts to 6.2bilion carats with an estimated 5 billion carats already mined globally from the 18th century to today, and a remaining global reserve of 1.2 billion carats.
- Size Distribution: Around 90% of these rough diamonds are below 1 carat, with less than 1% exceeding 3 carats. Considering the weight loss during polishing (approximately 40%), this leaves about 3 billion carats of polished diamonds available in the market and 0.72 billion in reserves.
- Weight: Adding to the point above many rough stones are split into two before being polished, meaning that even a 3ct rough will not yield a one 1.8ct diamond.
- Clarity: Diamonds tend to have natural inclusions, and the less inclusions the rarer.
- Color: Most diamonds will have a tint of yellow or brown, with white only stones being rarer.
- Fancy Color: It is estimated that only 1 in 10000 rough diamonds will present a fancy color, mostly yellow or brown, with rare greens, pinks, reds, and blues.
- Emotional significance: Diamonds hold profound emotional significance, traditionally associated with milestones such as engagements, weddings, and other life events. It represents personal stories, memories, and family legacies.
- Durability and heritage: When properly cared for, diamonds can last forever and can be passed down through generations. For example, Old Mine Cuts, which are often over 200 years old, still look as stunning as when they were first cut.
- Craftmanship: Polishing a diamond is an art form, where a skilled cutter transforms a dull rough into a brilliant gem. As a painter unveils a masterpiece from a blank canvas, a cutter polishes and refines each facet, until the polished stone is formed.
- Diamonds can be assets: Well selected diamond, bought at a fair value, is an asset and will hold its value. Despite safety storage, it has no other costs or maintenance, is durable, and has its intrinsic value.
Conclusion: Whilst prices are subjective, value isn’t. Natural diamond sellers should embrace and pass on the true value of what they are selling along the supply chain - from rough stone dealers to jewellers. Prices will follow.
If you don’t believe in the value of what you are holding or selling, why should your buyer?