Has the myth of exorbitant prices come to an end?, Diamond prices plummet | Diamond | Myth
According to the recently released Global Rough Diamond Price Index, diamond prices have fallen by 18% from their historical high in February 2022; Since the beginning of this year, diamond prices have fallen by 6.5%.
"A 1 carat natural diamond that is slightly above average was priced at $6700 a year ago, but now the same diamond is priced at $5300," independent diamond analyst Paul Kinnisky said in an interview with CNBC in the United States
For a while, the "sharp drop in diamond prices" sparked heated discussions, with some even claiming that the "sky high price myth" of diamonds has been ended.
Wan Zhe, a professor at Beijing Normal University and former chief economist of China Gold Group, believes in an interview with Guoshi Direct that the current drop in diamond prices is a normal decline after reaching a high level in the past two years.
According to the "Performance of Rough Diamond Price Index by Size over the Past 10 Years" data chart released by Paul Kinnisky in October last year, the diamond price index has been fluctuating up and down from the third quarter of 2013 to the second quarter of 2021, but the overall fluctuation range is not significant. Starting from the second quarter of 2021, the index skyrocketed to a historic high in February 2022 and then began to decline.
Wan Zhe's analysis shows that in the first two years, due to the pandemic and international supply chain crisis, global inflation has skyrocketed, and diamond prices have remained high. One important reason for the current decline is that diamond prices are returning to normal levels. The decline in commodity prices this year is also the reason.
Meanwhile, in March 2022, the Federal Reserve began raising interest rates, leading to a global wave of interest rate hikes. "The overall financial conditions have shifted from extremely loose to extremely tight, and the global outlook for the economy is becoming cautious. The public's consumption of non essential goods is starting to decrease, with diamonds being one of them," said Wan Zhe.
Against the backdrop of reduced diamond demand and difficulties faced by midstream processing plants due to slow market development, international natural diamond leader De Beers has lowered the prices of rough diamonds several times.
The last time was in June. According to industry trends released by the China Treasure Association Fund in June, De Beers recently lowered the price of rough diamonds of 1-1.5 carats and over 2 carats at a trade fair, with a reduction of 5% -10%, and focused on lower quality products.
Will diamond prices continue to decline in the future?
Pan and Lin Xiangguo, co director and researcher of the Digital Economy and Financial Innovation Research Center at the International Business School of Zhejiang University, expressed that diamond prices will definitely plummet. Because diamonds are just a manifestation of carbon elements, they will ultimately be cheap and easy to obtain.
He also believes that the price decline is the result of a two-way effect of supply and demand. From the demand side, diamonds are closely related to marriage. In recent years, East Asia has experienced a decline in marriage rates due to various reasons, which has objectively compressed the demand market for diamonds; On the other hand, the correlation between diamonds and love is also weakening, and after centuries of marketing, consumers generally experience aesthetic fatigue.
In addition, the widespread entry of cultivated diamonds into the market has also affected the natural diamond market, causing some consumers to turn to cheaper alternative options.
In Wan Zhe's view, diamond prices experienced a historic peak in 2022, with a particularly high base, so the current decline is a normal decline.
So, will diamonds continue to decrease in price? She said that this statement has a long history, but from the current perspective, large diamonds still hold value and there are still consumers willing to invest. Diamond consumption will continue to maintain a complementary relationship with the global economy.