The diamond market boasts some very promising fundamentals, says Garry White in The Daily Telegraph. Prices, which have been flat for the past nine months, are likely to rise because in the past two decades there have been no major discoveries of diamond fields, and the pickings from existing mines are becoming ever slimmer. On the demand side, the expanding global middle class, “often enthusiastic” to adopt the tradition of diamond engagement rings, bodes well, although America remains the largest market for diamonds.
So the long-term picture is encouraging, and the short-term outlook for prices may soon start to improve too. For one thing, “the US is again beginning to look like the engine for growth as consumer confidence rises”, says Kieron Hodgson of Charles Stanley. It recently hit a five-year high. The gradual economic recovery is helping, while rising asset markets are bolstering confidence. Asian demand looks solid, so this could be an especially good time to pick up a diamond stock. Goldman Sachs likes London-listed Petra Diamonds (PDL) and Gem Diamonds (GEMD). Goldman’s price target for Petra, now selling for 117p, is 180p. The bank has also just upgraded Gem to ‘buy’.