Prospects for diamond prices are looking brighter as a multitude of factors are set to drive up costs in the coming years.
What Happened: A plethora of elements including tighter supply, increased demand, and a predicted surge in weddings are all contributing to the optimistic market outlook, Business Insider reported on Monday
After a year of declining sales and tumbling prices in all categories of diamonds, the industry is now on the edge of a turnaround. Diamond prices have shown signs of recovery in recent months, with the International Diamond Exchange’s Diamond Index surpassing a level of 110 in January.
Cormac Kinney, CEO of commodities trading firm Diamond Standard, and leading diamond analyst Paul Ziminsky expect prices to increase by 5%-10% this year. Looking further ahead, they anticipate significant growth in the diamond market over the next two decades.
A supply squeeze is imminent as diamond producers, who overproduced in 2023 after halting operations during the pandemic, now work to restrict supply. For instance, Russian mining giant Alrosa paused rough diamond sales for two months last year to bolster prices.
The global diamond supply will be further strained due to the G7’s recent ban on Russian diamonds, preventing them from being sold to Chinese and Indian refiners and ultimately reaching Western markets.
Concurrently, demand is set to surge, particularly in the U.S., where engagement rings make up a significant portion of the diamond market. Early indicators suggest an uptick in couples preparing to tie the knot, with Google search interest for engagement rings rising by 10% in Q3, according to Signet Jewelers.
Additionally, Kinney predicts diamond prices will be propelled by investors seeking hard assets amidst economic uncertainties such as inflation, recession, and volatility.
Despite the lack of a specific price target, Kinney remains confident that diamond prices will experience substantial growth over 20 years, potentially emulating the impressive performance of gold, which has seen prices skyrocket over 500% since 2003.
Why It Matters: The diamond market’s unique dynamics have attracted investor interest. While investors currently own just 1% of the diamond market, the ongoing standardization of diamonds could make them as relevant as precious metals. This could further drive up diamond prices, especially given the current economic climate, which is characterized by higher risks of inflation, recession, and volatility.
These developments in the diamond market are significant for both consumers and investors. Consumers looking to purchase diamonds, especially for engagement rings, may face higher prices in the near future. Meanwhile, investors may see this as an opportune time to enter the diamond market, given the potential for substantial price increases in the coming years.
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