Why diamonds have lost their lustre

Diamonds may be a girl’s best friend, but they have done precious little for investors lately. The Rapaport Diamond trade index, which tracks the average asking price of the top 25 best-quality one-carat stones, has hit a near-seven-year low of around 7,400. In 2011, it peaked at 12,000. The price of rough diamonds from key producer De Beers fell by 15% in 2015, as a build-up of supply has coincided with a cooling retail demand.

The latter stems largely from a slowdown in China, the second-biggest retail market after the US, as Finanz und Wirtschaft points out, where the impact of a slowing economy has been compounded by a campaign against corruption. It will take some time for the supply overhang to be worked off, as mine output is only expected to peak in 2017. Don’t expect a recovery in rough prices “for at least  12 months”, analysts at brokerage Liberum told the FT.

Merryn

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