Investors in the diamond sector “have had a torrid time” in recent years, says Garry White in The Daily Telegraph. Prices crashed during the global financial crisis, then rebounded sharply, overshot, and corrected again in 2012. Now, however, the downturn appears to be bottoming out.
The Rapaport Diamond Trade Index is deemed the global benchmark and tracks the average asking price of the top 25, best-quality, one-carat diamonds. It lost 12.5% last year, but was flat in December and rose in late January.
And all the preconditions for recovery are in place. Nomura points to the “plodding return” of the key US market, while demand has continued to grow in Asia, thanks to the new middle classes’ spending power. While the global recovery is underpinning demand, supply is tightening.
In the mid-1990s there were many new discoveries and a large stockpile at De Beers, the world’s largest diamond group. But now the stockpile “has been whittled down and there has been a real shortage of new diamond discoveries”, says Jon H Bergtheil of Citigroup. So a “significant shortage” is likely in the second half of this decade.
All this means that tucking away a diamond share or two could be a shrewd move. Nomura says that US-listed Harry Winston (HWD) is “worth investigating”, while White’s preferred play is UK-listed Petra Diamonds (PDL).