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

How the commodities supercycle will foment unrest around the world
Commodities

How the commodities supercycle will foment unrest around the world

Commodities, including metals, energy and agricultural goods have seen prices climb steadily. With many societies are already on edge, we could see a …
21 Jan 2021
Gold has had a tough start to 2021, but we’ve been here before
Gold

Gold has had a tough start to 2021, but we’ve been here before

Gold has had a disappointing start to the year – in an increasingly digital world, it’s the ultimate analogue asset. Nevertheless, says Dominic Frisby…
20 Jan 2021
More upside to come for the oil price
Oil

More upside to come for the oil price

The Brent crude oil price its highest level since last February this week. And there could be more gains to come.
14 Jan 2021
A simple way to profit from the next big trend change in the markets
Investment strategy

A simple way to profit from the next big trend change in the markets

Change is coming to the markets as the tech-stock bull market of the 2010s is replaced by a new cycle of rising commodity prices. John Stepek explains…
14 Jan 2021

Most Popular

Why we won’t see a house-price crash in 2021
House prices

Why we won’t see a house-price crash in 2021

Lockdown sent house prices berserk as cooped up home-workers fled for bigger properties in the country. And while they won’t rise quite as much this y…
18 Jan 2021
Prepare for the end of the epic bubble in US stocks
US stockmarkets

Prepare for the end of the epic bubble in US stocks

US stocks are as expensive as they’ve ever been. How can you prepare your portfolio for a bubble bursting?
18 Jan 2021
The best investment trusts to buy for 2021
Investment trusts

The best investment trusts to buy for 2021

Sectors ranging from emerging markets to student accommodation look poised to do well this year, says David Stevenson, as he picks the best investment…
19 Jan 2021