Watches and jewelry are definitely a considerable part of the collectibles sector. Some jewelry prices have soared over certain periods of time, and if you buy fine watches or have bought any jewelry you know how easy it is to spend $10,000 or $20,000 without even getting too deep into a jewelry shelf. Diamonds obviously make up a large portion of the watch and jewelry sector. The threat of war and formal sanctions, and the ongoing inflationary pressures that were already there, are all having a significant impact on the price of diamonds.

Collectors Dashboard evaluates collectibles as an alternative asset class. This means collectibles are attracting the same capital that could have been invested into stocks or bonds. If diamonds, jewelry, watches and so on easily reach $10,000 or $20,000, the capital used for buying these could have easily been invested into traditional assets. We wanted to look at data from Rapaport as the premiere price source in the industry, and we also looked into outside sources for production, demand and rough price data that is available at the market as of this moment.

A press release from Rapaport is showing a major change in the price of diamonds for February, but also for 2022 as a whole and even larger year-over-year. According to Rapaport, February’s rise in diamond prices was as higher rough costs have forced manufacturers to raise their polished valuations. Despite economic and geopolitical uncertainty causing a cautious sentiment, the diamond market is being supported by U.S. demand.

PRICE, DEMAND, SENTIMENT TRENDS

The RapNet Diamond Index (RAPI) for 1-carat diamonds rose 5.6% in February and was up 12.9% year-to-date. The RAPI for 3 ct. diamonds was up even more at +5.7% in February and 13.2% year-to-date. On a year-over0-year basis, the indexes were up 32.3% for the 1 ct. weight and up 34.6% for the 3 ct.

There are many pressures weighing on sentiment — higher U.S. inflation, rate hikes by the Federal Reserve, the lingering coronavirus pandemic, Russia’s invasion of Ukraine, and US sanctions affecting Alrosa. Chinese buyers were referenced as being more prudent during this latest lunar new year. There are some concerns that sanctions will disrupt the mining supply and create rough shortages from the world’s largest volume diamond producer.

Rapaport also brought up the notion that we would highlight as an issue where supply and demand forces start to play the game of “who blinks first” when scarcities are surfacing:

Some polished suppliers were hesitant to sell as they anticipated inventory valuations would rise further. Buyers became more restrained toward the end of February due to concerns about rising prices along with economic factors affecting consumer confidence.

OUTSIDE REFERENCES

As a quick refresher to add some context to the data, Russia is believed to hold the world’s largest and richest diamond resources over all nations. Russia is also by far the world’s largest producer and exporter of rough diamonds. As of 2021, the latest data showed that Alarosa’s main mine accounts for approximately 90% of Russia’s annual diamond production. And according to Statista data from April of 2021, Russia’s diamond production of 31+ million carats in 2020 was a decrease of over 14 million carats from 2020 and was its lowest level since 2003.

We ran some basic price search data inside of Blue Nile as a retail destination for those who want to buy stones rather than finished jewelry. Choosing a princess cut, looking at 1 ct. for middle of the grades in cut, color and clarity we found prices ranging from basically $3,700 to $4,500 — with the opportunities to go much higher if you so choose. And using the same criteria around the 2.0 ct. diamonds had many selections from $17,000 to $21,000 (and easily much higher if you choose) and the 3 ct. ranges had a range mostly of $40,000 to $47,000 with a couple lower priced options and many much higher priced options.

AND IN THE END…

It seems like the long and short of it means that diamond prices could be higher or could be lower in the months ahead. That is of course true for any commodity, just like stocks or bonds. That said, what is quite obvious is that your diamond engagement ring, wedding ring, or whatever diamond jewelry you were buying this year is just going to cost a lot more than it did last year.