The global diamonds market. Vitale report 12/21/2013

TRADE ALERT: Buyers beware. Persistent reports that large amounts of synthetic lab grown diamonds are being mixed with natural diamonds in parcels of melee and pointers. Know your supplier and insist phrase “natural, untreated diamonds” be included on all invoices.

• Polished buyers in India looking for deals before Diwali vacation in November. Suppliers for small diamonds  resisting lower prices even though local market is weak. U.S. stable with very strong demand and firming prices for medium quality (SI goods) despite slump in consumer confidence.  Supplier for high end quality is upper price (in particularly for top quality like D, IF).

• Rough markets quiet as manufacturers take early Diwali vacation.

• Chow Tai Fook’s 2Q revenue +35%, gem-set jewelry same-store sales +4%. ABN Amro to close Botswana office.

• Colored diamonds are booming! The colored diamond trade has traditionally been a very intimate market, with its own set of rules and a particular skill set. Christie’s New York sold 75 percent by lot with sales totaling $46.7M, well above pre-sale estimates. Christie’s Geneva is expecting to sell a rare, pear-shaped, 14.82-carat, orange, VS1, type IIa diamond for $17M to $20M next month.   See the article below

• Gem Diamonds sold a 12.47-carat, blue diamond from Letšeng for $7.5M, or $603,047 a carat, as mining there continues to focus on the higher-grade, highervalue satellite pipe through 2014.

• Japan’s polished diamond imports continue to show year-over-year declines due to softer diamond prices and the sharp weakening of the Japanese yen against the dollar in the past year.

• Two out of five U.S. consumers have scaled back spending in recent weeks due to the government shutdown. According to ICSC and Goldman Sachs, those earning less than $50,000 have been the most affected. A NRF survey showed consumers expect to spend $536.85 on gifts, representing a 2.5% decline from 2012. 23.3% selected jewelry or precious metal accessories as their gift of choice, down 0.7% from 24% in 2012.

The natural colored diamonds BOOM !

Fancy colored diamond prices are showing significant gains in 2013 while other goods struggle along. As a result, the various auctions and tenders held in the past two weeks continued to set records, headlining the strength of the colored diamond market with both dealers and private buyers driving up prices.

Of course, this trend is not new. The strength of the colored diamond market has been well documented in this publication and others, maintaining a decade-long uptrend, even through the crash of 2008. But industry veterans

note a significant change in the past year.

With more buyers around and diminishing supply, prices have continued  to increase. While there is no formal price list for colored goods. We estimates that prices for pink diamonds are up about 30 percent from a year ago, while fancy intense vivid yellow goods are up around 35 percent, with lower-quality yellow diamonds up approximately 10 percent. Prices of fancy blue diamonds have increased by about 35 percent in the past two years.

Similar estimates were reported from Rio Tinto’s recent Argyle tender of pink diamonds. Leibish Polnauer, of Leibish & Co., who won seven of the 64 Argyle diamonds on offer at the tender, said prices were about 35 percent higher than last year. He similarly reasoned that there were more people bidding. As a result, Rio Tinto fetched record prices with its top lot, a 2.51-carat, fancy deep pink diamond, selling for more than $2 million, or at least $797,000 per carat. But apart from the growing dealer demand, the rarity of supply and a growing pool of wealthy consumers for these goods is fueling the rush and driving up prices.

Certainly, these goods are rare. As one dealer explained, they’re a niche within a niche within a niche. Rio Tinto’s Argyle mine in Australia, which the company claims produces more than 90 percent of the world’s rare pink diamonds, has commissioned underground mining to extend its life until 2020. But the mine is not expected to have too many years left beyond that and those rare stones are becoming harder, and more expensive, to find the deeper it gets.

That rarity is also spurring a new penchant for colored diamonds among collectors and investors alike. Growing wealth in Asia, Eastern Europe and the Middle East has helped maintain high demand for colored diamonds as the new rich recognize its investment value. In addition, the market has been buoyed as high-end consumers in the U.S. and Europe have regained some lost confidence.

Buyers were therefore spread geographically at the recent Christie’s New York Magnificent Jewels sale. Three of the top ten lots went to private Asian buyers, three to the international trade, two of the top buyers remained anonymous, and one lot sold to a member of the U.S. trade. A very top lot sold to UK-based jeweler, which bought the rectangular cut, 8.77-carat, fancy intense pink, VVS1 diamond for $6.3 million, or $721,200 per carat.

Meanwhile, private Asian buyers dominated the recent Sotheby’s Hong Kong auction, in which the top lots were predominantly white goods. The highlight there was an oval, 118.28-carat, D, FL, type IIa diamond that sold for $30.7 million, or $258,708 p

er carat, setting a record for a white diamond sold at auction (see our last Diamond Weekly Market Report®).

But those larger, high-end investment-grade diamonds are an exception in the white diamond space and another niche within a niche.

Commercial diamonds have been volatile in the past five years and have not offered the same returns as their colored counterparts. The market has been especially cautious in the past 12 months: for 1-carat certified (white) polished diamond prices has dropped 5 percent in October from a year ago. Certified 0.30-carat to 0.50-carat goods have fared better as uncertain markets tend to shift toward lower price points. In contrast, the strong demand witnessed for colored diamonds at the auctions has filtered down to commercial goods as well. Dealers explain that the rarity enhances the investment appeal of colored diamonds even among medium-to-lower-end consumers.
However, the market is not without limits. A showcase 7.59-carat, fancy vivid blue, IF diamond named the “Premier Blue” failed to sell at Sotheby’s Hong Kong. According to the Associated Press, bidding reached $16.1 million, which was below its reserve. Dealers said that the piece was way over-priced and that “the blue was a weak color.” So we have to pay attention about the color and the market trend. In particularly for a short term focused investors.
There may also be a question if the colored diamond trade can handle the crowd. After all, it has traditionally been a very intimate market, with its own set of rules and a particular skill set. The lack of a formal or transparent pricing structure adds to its mystique and gives it a high-entry barrier. Therefore, it is likely that many of those newcomers who have entered the market will eventually drop out and seek their lost margins in other niche products outside the round, white diamond space.
But still, the outlook for colored diamonds remains positive. Rachminov dismisses the notion that the colored market may be in a bubble that will eventually burst. Polnauer and others agree with him. They justify that dealers have shifted to this market for a reason and continue to compete for an ever dwindling supply of goods. Prices have increased due to consumer demand and not speculation.
Nothing is completely bubble resistant. But for now, consumers are looking for something unusual and exciting, with real value, at a time when low interest rates continue to drive the wealthy to invest in collectible, connoisseur items. In such an environment, colored diamonds surely make the grade and are likely to outperform other assets in the short term. For now, the colored market remains the one bright spot of real growth in an otherwise stagnant jewellery industry.

Local markets

United States: Polished diamond demand is slowly improving ahead of the Black Friday- Thanksgiving weekend, as expectations for the season are positive. However, there is concern that the government shutdown, which ended Thursday, has weakened consumer confidence and economic growth, and may also diminish gift spending in November-December. That, coupled with suspected weakness in the global polished trade, has influenced wholesale and retail jewelers to hold relatively low diamond inventory and they are careful not to overstock at this time. Bridal sales are steady at the retail level.

Europe: Polished diamond trading is stable with strong demand for SI-clarity goods in most category diamonds. Dealers note good demand from U.S. and European buyers ahead of the Christmas season, although buying remains very selective and buyers appear to be delaying larger inventory purchases as late as possible. Indian dealers have become a bit more active in Antwerp ahead of the Diwali break. Rough trading is slow with De Beers goods trading at discount to list prices or with long-term credit on the secondary market.

China: Consumer confidence continues to tread cautiously with retailers concerned that the recent U.S. debt ceiling debate might spread uncertainty across the globe. They’re hoping that third quarter economic growth data, due out after press time, will spur confidence. Wholesale diamond trading is restrained with good demand for commercial goods. Currently, 0.30 to 0.50-carat, G-H, VS-SI diamonds are the strongest category.

Hong Kong: The wholesale market is slow with dealers cautious after the National Day Golden Week. Sales to China are relatively slow and there is a sense that consumer sentiment is still sluggish compared to previous years. Retail sales are steady with jewelry retailers hoping to continue the momentum from Golden Week through the Christmas season.

India: Trading has improved as some confidence returned in October, due in part to the stabilization of the rupee against the U.S. dollar. Local dealers are returning to the market as Diwali approaches on November 3. A strong presence of foreign buyers remains in Mumbai looking for goods before Indian businesses close for the festival. While there is a reported shortage of in-demand goods, an influx of diamonds to the market is expected in the coming weeks. There is strong demand for dossiers in 0.30 to 0.59-carat, H-J, SI diamonds and steady demand for 1-carat, G-H, SI goods. Local buyers are selective and remain cautious that prices may soften due to recent declines in rough prices. Domestic rough trading is slow and manufacturing remains well below capacity.

The stone of the week:

Natural WHITE diamond

Weight                                 4,01

Color                              F

UV Fluorescence         None

Clarity (10 X)                       VVS2

Polish                         Excellent

Symmetry                 Excellent 

Cut                              Square Emerald cut. Very good

Measurement              8,53 x 8,48 mm h 5,91 mm

Diamond Report by GIA n. 2146822081. 26 MAR 2013 

Investment value:

Market value (price per carat):               $ 47.000 / € 34.840

Special price per carat for Vitale Client’s:  $ 35.000 / € 25.940           Stone price:   140.350 $     

Short term investment level                           3

Medium/long term investment level                    4

Speed reselling level                                       3

Scale:   1 to 5                lowest value = 1  ;  highest value = 5

More information here:
VITALE Diamond Veekly Market Report

www.vitalemontecarlo.com

Note: this stone represent a very good investment for the investor who have different diamonds. The stone is perfect! This cut is quite rare and very appreciate in the US market. For seriously interest clients the stone can be available in Monaco for viewing and evaluation within 3 working days. Various payment offers can be considered.

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