Diamonds look 'less than precious'

The price of rough diamonds is in the doldrums, but the longer-term outlook is more encouraging.

Rough diamonds are having a rough time, says Thomas Biesheuvel on Bloomberg.com. Their price has fallen by 14% this year, prompting De Beers, which accounts for 30% of overall supply, to trim output twice in recent months, beef up its advertising budget, and cut prices by 10% in August. So what's gone wrong?

"The real worry, as ever, is China," says Helen Thomas in The Wall Street Journal. It is the second-biggest source of consumer demand for diamonds. But by 2018 it is expected to account for a fifth of consumer demand, compared to America's 41%. Growth jitters and a corruption crackdown have left companies sitting on excess stock.

Meanwhile, a stronger dollar has inflated the cost of buying diamonds in Europe and Asia, further undermining demand. Lower prices for polished stones have discouraged purchases of rough diamonds by diamond cutters, many of whom have low margins and worry about losing profits.

With this backdrop unlikely to change soon, "low diamond prices will take time to clear", says Thomas. The longer-term outlook is encouraging, because only a handful of mines will start up in the next few years, while the increasing wealth of emerging-market consumers also bodes well. But for now, the prognosis is "less than precious".

Recommended

The charts that matter: bond yields slip while bitcoin tops $60,000
Economy

The charts that matter: bond yields slip while bitcoin tops $60,000

Cryptocurrency bitcoin soared to over $60,000 this week, while government bond yields fell back. Here’s how that has affected the charts that matter m…
16 Oct 2021
Will silver finally realise its potential? I’ve no idea – but I’ve just bought a load
Silver and other precious metals

Will silver finally realise its potential? I’ve no idea – but I’ve just bought a load

For investors, silver is incredibly frustrating. It has more potential than almost any other metal, but that potential is never realised. So why has D…
13 Oct 2021
The charts that matter: Brent, bitcoin and bond yields flying high
Global Economy

The charts that matter: Brent, bitcoin and bond yields flying high

Government bond yields continued to climb, along with bitcoin and the oil price. Here’s how that has affected the charts that matter most to the globa…
9 Oct 2021
What happened to the commodities supercycle?
Commodities

What happened to the commodities supercycle?

There was much talk earlier this year of a commodities supercycle. But even as energy markets boom, other commodities have come back down to earth.
9 Oct 2021

Most Popular

Inflation is still one of the biggest threats to your personal finances
Investment strategy

Inflation is still one of the biggest threats to your personal finances

Central bankers and economists insist inflation will be gone by next year. We're not so sure, says Merryn Somerset Webb. So if you haven’t started to …
1 Oct 2021
How to invest in SMRs – the future of green energy
Energy

How to invest in SMRs – the future of green energy

The UK’s electricity supply needs to be more robust for days when the wind doesn’t blow. We need nuclear power, says Dominic Frisby. And the future of…
6 Oct 2021
How to invest as we move to a hydrogen economy
Energy

How to invest as we move to a hydrogen economy

The government has started to roll out its plans for switching us over from fossil fuels to hydrogen and renewable energy. Should investors buy in? St…
8 Oct 2021