Wednesday, September 14, 2011

Rough diamond prices could plateau - DTCB

Diamond Trading Company Botswana (DTCB) expects rough diamond prices to flatten later this year, following a record-breaking performance in 2011 during which the gemstones rose by 35 percent on strong retail demand.

According to the Bank of Botswana and Statistics Botswana, diamond exports rose nearly every month this year, frequently touching record territory on the back of positive supply/demand dynamics.

For the first seven months of the year, diamond exports, which for Botswana include both polished and rough stones, were at a historic high of P20.5 billion, echoing the robust trends seen in jewellery auctions across the world. The emergence of diamonds as a safe haven for investors in the Middle East also buoyed demand while the record-breaking performance also attracted speculative buyers who also contributed to the positive demand.

However, while announcing last week that it had held its largest ever sale in July, DTCB cautioned that going forward prices could plateau as evidenced by recent auctions for polished diamonds and jewellery in India. Says DTCB in the latest edition of an in-house publication.

"DTCB recently celebrated its largest ever diamond sale. The market for gem goods has sustained a significant period of growth in rough diamond prices which has been driven in part by a healthy demand for polished diamonds by traders and retailers, and a perceived general shortage of diamonds in the short- to medium-term.

"The latest diamond show in India seems to suggest that rough prices are approaching saturation point as the market plateaus. We watch with anticipation the effects, if any, of the current global economic developments on the diamond market." In line with policy, DTCB officials declined to detail the size of their July auction, although its parent company, the London-based Diamond Trading Company (DTC), recorded a mammoth US$850 million (P5.7 billion) sale for the same month. DTCB's sales are figured into DTC's, together with similar auctions from South Africa and Namibia.

From the Indian International Jewellery Show (IIJS), indications were of a smoothening out of the sharp rise seen in diamond prices across the rough, polished and jewellery categories.

The five-day IIJSS that wrapped up on August 8 and provides a platform for the diamond trade, noted downward pressure from some buyers, indicating a slight change in market dynamics.

Said Daxesh Doshi, an executive with a diamond polishing firm, in a statement: "This year the show has been good, though the quality-conscious buyers want to buy four to five percent lesser than the usual prices.

"I guess it's because of the price point related both to gold as well as diamonds. The buyers are a bit apprehensive about the international market, but I feel that the domestic scenario is just too good." However, DTC CEO, Varda Shine, said while prices could flatten, there were signs of upward potential nearer the Chinese New Year in December. China and India have emerged as fast-growing diamond consumers, although the US remains the single most important destination for the precious stones.

"Not only are we seeing more demand from a greater variety of sources, we are also seeing new types of demand, or a different consumption rationale evolving," Shine said in a recent interview with diamond guru, Chaim Even-Zohar. "As investors have been stung by the volatility of less tangible investments, the price of gold and diamonds as hard assets and diversifiers of risk in investment portfolios has grown.

"The financial investors have - quite correctly so - seen the strong fundamentals of the diamond industry, identified the clear opportunity that exists here and are very eager to put their money in diamonds."

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