Industry Analysis

Retailers, Diamond Trade Still Vying Over Prices

Russell Shor, senior industry analyst
5/7/2014
The octahedron rough weighs 15.98 carats; the faceted diamonds are between 3.00 and 3.50 carats. Photo by Robert Weldon/GIA
The tug-of-war between retailers, diamond miners and manufacturers over prices continues even as the world economy slowly improves.

A number of diamond price monitoring services reported that diamonds have given up most of the price gains made earlier in the year. Additionally, Blue Nile Chief Financial Officer David Binder, speaking in a news conference announcing first quarter results, said that consumers are resisting paying high prices for polished, making it difficult for diamond manufacturers and wholesalers to pass on their increased costs.

The pressures on middle-class consumers have been well-reported and have affected retail demand for many products, including jewelry. However, one recent report notes a growing caution among U.S. luxury buyers as well.

Unity Marketing’s survey of luxury buyers – who have driven the increase in diamond and jewelry buying in the U.S. over the past several years – found that those consumers plan to hold the line on spending, putting more of their discretionary funds into investments and savings.

Online retailer Blue Nile reported its first quarter sales rose 6.8 percent compared to the previous year, with its strongest business being its core engagement ring pages. However, this is below the average of about 11 percent growth the company has reported in each of the past four years.

Press reports from China indicate that retail jewelry sales continue to slow from the heady growth of previous years. These year-on-year comparisons of retail results may not accurately reflect the market as last year’s steep drop in the gold price created a buying spree that caused an abnormal spike in sales. However, diamond dealers and manufacturers noted that Chinese retailers have begun trading down on quality to hold the line on prices as consumers there grow more cautious.

AUCTIONS: Consumer reticence does not appear to be having an effect on the extreme top end of the market, as recent jewelry auctions continue to command extreme prices.

Sales at Christie’s April 19 New York auction totaled $60.6 million. Major items included a pair of GIA-graded round brilliant, D color, Internally Flawless diamonds, a 22.6 carat and 22.31 carat, which brought $8.56 million; and a 40.43 carat, D color, potentially Flawless GIA-graded oval-cut diamond which brought $7.7 million, or nearly $190,000 per carat.

On April 29, William Doyle Galleries in New York sold a pair of natural drop pearls believed to have been owned by Empress Eugenie of France for a record auction price of $3.3 million. The same day, Sotheby’s New York sold a 28.18 carat Kashmir sapphire for $5.09 million, or $180, 731 per carat, a world record price for such a stone.

As reported last month, on April 6 in Hong Kong, Sotheby’s sold the jade-bead Hutton-Mdivani necklace for a record $27 million, double its pre-sale estimate and the record auction price for a jadeite jewel. The piece contained 27 “high-translucent” jade beads, ranging from 15.4 to 19.2 mm.

The week of May 12 will feature two major auctions in Geneva. On May 13, Sotheby’s will offer the 100.09 carat Graff Vivid Yellow Diamond, expected to sell for $15 to $25 million, and the 31.34 carat D, potentially flawless Victory Diamond, which carries a pre-sale estimate of $5 to $8 million.

On the following day, Christie's will offer a 13.22 carat Fancy Vivid Blue diamond, named “The Blue,” the largest Flawless, Vivid Blue diamond to come up for auction (the 27.64 carat Heart of Eternity is the largest known Fancy Vivid Blue), which it expects to sell for $25 million; and the 5.5 carat Fancy Vivid bluish green The Ocean Dream, the largest vivid blue-green diamond ever to be auctioned. It is expected to bring between $7 and $10 million.

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