Editor’s Note
This analysis examines the factors signaling a potential recovery in diamond prices after a period of decline, driven by supply constraints and shifting demand.
Prospects for diamond prices look brighter due to multiple factors that will drive costs in the coming years.
A multitude of elements, including tighter supply, growing demand, and an anticipated increase in weddings, are contributing to an optimistic market outlook, reported Business Insider on Monday.
After a year of declining sales and falling prices across all diamond categories, the industry is on the brink of a turnaround. Diamond prices have shown signs of recovery in recent months, with the International Diamond Exchange Index surpassing a level of 110 in January.
A supply squeeze is looming as diamond producers, who overproduced in 2023 after halting operations during the pandemic, are now working to restrict supply. For example, Russian mining giant Alrosa paused rough diamond sales for two months last year to strengthen prices.
The global diamond supply will be further limited due to the recent G7 ban on Russian diamonds, preventing them from being sold to Chinese and Indian refiners and, ultimately, reaching Western markets.
Concurrently, demand is expected to rise, particularly in the U.S., where engagement rings constitute a significant portion of the diamond market. Early indicators suggest an increase in couples preparing to marry, with Google search interest for engagement rings rising 10% in the third quarter, according to Signet Jewelers.
Furthermore, Kinney predicts that diamond prices will be driven by investors seeking tangible assets amid 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 its prices surge over 500% since 2003.
The unique dynamics of the diamond market have attracted investor interest. Although investors currently own only 1% of the diamond market, the ongoing standardization of diamonds could make them as relevant as precious metals. This could further boost diamond prices, especially given the current economic climate, 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 buy diamonds, especially for engagement rings, could face higher prices in the near future. Meanwhile, investors may see this as an opportune time to enter the diamond market, given the possibility of substantial price increases in the coming years.