Posted on | October 6, 2011 | 4 Comments
As the world economy dips into a recession, we’re looking at our holdings in diamonds and deciding how to navigate our through this market. The stock market has been getting crushed the past couple months and even metals are unstable. Gold reached a high of approx $1920 per ounce and is now hovering at $1650. Silver reached $43 an ounce a couple months ago and is currently trading at approx $32. Percentage wise, it’s a HUGE swing. I could go on all day about metals – click here to read what I wrote back in January 2011 in a post entitled, “Silver…The New Gold”.
Let’s talk my favorite subject – DIAMONDS. Diamonds are an interesting category because they are not trading as a commodity on any exchanges (yet), but they certainly can be treated as an asset with real value in the market. Most jewelers don’t want to tell customers about diamonds as a commodity, or the value of diamonds in the wholesale market. They would rather “romance” the sale – much like the current and past Debeers ad campaigns. Most people in the diamond indusrty are still resistant to
Back in June, I wrote a blog post, JCK Las Vegas 2011 – Diamonds Are King!, and besides discussing how much fun I had in Vegas, I talked about the how the diamond market was BOOMING. I was getting top top dollar from buyers, especially from India and Asia, where the demand seemed to be high. Since that time, and especially in the past month, I’ve noticed a lot of hesitation from buyers. They are afraid to buy because they don’t know what’s coming worldwide – Europe is a mess and the US isn’t much better off. Bottom line is that each business has to prepare for natural downturns in the market and adjust accordingly. It’s like any business. My personal opinion is that diamonds will come back up as we get closer to the holidays and make a strong run into 2012.
Martin Rapaport, who some may say is the diamond market maker, summed it up recently with this quote:
“The diamond trade must accept the fact that diamonds are part of the real world and that diamond prices go up and down. Price volatility is to be expected and accepted as a normal part of doing business. Firms should develop strategies for dealing with downward moving markets. Smart sellers recognize that inventory cost should be based on replacement cost rather than historic cost. They remain profitable and support market prices by selling cheap and buying cheaper. Lower prices are a healthy part of the economic cycle as they create excellent buying opportunities and higher profits for smart buyers who ensure that diamonds remain an excellent value in uncertain times.” said Martin Rapaport, Chairman of the Rapaport Group.”
Like any smart investor, we look at a little downturn as an excellent buying opportunity. If you’re in market for a diamond, it’s a GREAT time to buy. Just remember that, “Diamonds are part of the real world…”