News: U.S. pre-holiday demand weak and problematic as Oct. retail sales come in flat for the majors. Jewelers keep inventories tight and promote competitive discounts to entice early shopping. Gold sets record ($1,099/oz) as dollar remains weak. Stable demand for caraters in Far East with shortages in G-I goods. Demand weakens for 2cts+. Strong domestic Indian demand for melee/stars with shortages in lower qualities. Signet 3Q sales -2.5% to $614 mil. same-store sales -1.9%. Blue Nile 3Q sales +2% to $67 mil. but U.S. sales flat, profits +10% to $2.6 mil. Belgium Oct. polished exports -13% to $786 mil., rough imports +11% to $747 mil. ALROSA narrows FY09 loss 40% to $303 mil. in 3Q. Kimberley Process keeps Zimbabwe and pledges to monitor Marange diamonds. Israel to hold KP chair with DRC as vice chair in 2010.

ANNOUNCEMENTS:

RAPAPORT POLISHED DIAMOND TENDER
November 16–19 -- New York

Large selection of melee, rounds and fancies, -6.5 to 1ct+,
from promotional to very fine qualities. Excellent opportunity
for diamond and jewelry manufacturers to purchase at cash market prices.

By Appointment Only

Contact: Myles Schakler
Email: Tenders@diamonds.net
Phone: 1-212-354-9800


Martin Rapaport Special Presentation in Antwerp

New Realities: Challenges and Opportunities
Wednesday, November 18 at 5:00 PM
The Oppenheimer Room
Antwerp World Diamond Center
Hoveniersstraat 22, Antwerp, Belgium

RSVP Required: Belgium@diamonds.net or +323-232-3300

----------------------------------------------------


QUOTE OF THE WEEK:

"We are dealing with some of our competitors in liquidation mode. In the short-term, we do feel [price] pressure but it's just a short-term phenomena and we get through it ultimately. [A]t the midst and the tail-end of their liquidation sales, they have inventory that's not fresh, the consumers are not seeing exciting new styles. We believe that by differentiating ourselves...with unique programs like our Open Hearts by Jane Seymour and by our LeVian collections, that we have both clearance product plus these new programs."

Mark Light
U.S. division director, CEO
Signet Jewelers Limited


WORLD:

Zimbabwe is Spared

The Kimberley Process (KP) concluded its annual plenary in Namibia on Thursday with the decision to retain Zimbabwe as a member. The Kimberley Process Certification Scheme (KPCS) has adopted a working plan to monitor diamonds mined at the Marange fields in the Chiadzwa region as this area was out of compliance. Zimbabwe's two other mines — River Ranch and Murowe — were found to be compliant. Israel will adopt the position of KP chairman beginning in January 2010, with the Democratic Republic of the Congo (DRC) serving as vice chair.


Gold Sets New Record

Gold set a new record Wednesday, hitting an intraday high of $1,099 an ounce in trading after surging past its previous record high of $1,081 an ounce, which was set Tuesday. Gold held at a level that was 7 percent higher than one month ago and 43 percent higher than one year ago. The jump was, in part, due to continued pressure on the greenback and the India Reserve Bank’s recent $6.9 billion gold purchase.


Belgium’s Oct. Polished Exports -13%

Belgium's polished exports in October fell 13.2 percent to $785.5 million from one year ago. Polished diamond imports fell 21 percent to $764 million, giving Belgium a net export total of $21.5 million, compared with an export deficit of $63 million in October 2008. The country’s rough imports increased 12 percent to $746.8 million, its rough exports increased 9.5 percent to $678.1 million and its net rough imports rose 37 percent to $68.7 million. Belgium's net diamond account —net polished exports less net rough imports — improved 58 percent from one year ago, but remained in a deficit of $47.2 million.


RETAIL:

U.S. Retail Offers Mixed Results

According to data compiled by the International Council of Shopping Centers (ICSC), U.S. comparable-chain-store sales in October fell 2 percent for apparel versus a drop of 11 percent one year ago. Luxury stores posted a gain of 6.3 percent compared with a drop of 19.2 percent in October of 2008. Department store chains were flat versus a drop of 10.9 percent in 2008. Total U.S. comparable-store sales rose 2.1 percent, following a 4.2 percent decline one year ago, while overall retail sales slipped 0.8 percent in October, compared with September.

Third quarter results for the majors came in as follows: Macy's sales fell 4 percent to $5.5 billion, while its same-store sales fell 3.6 percent; J.C. Penney Company sales fell 3.2 percent to $4.2 billion, with comparable-store sales dropping 3.2 percent; Kohl's sales rose 6.5 percent to $4.1 billion, same-store sales decreased 1.3 percent; Saks sales fell 8.9 percent to $622.7 million, with its comparable-store sales declining by 10.1 percent; Nordstrom revenue increased 3.5 percent to $1.87 billion, but its same-store sales decreased 1.2 percent; and Neiman Marcus revenues fell 12 percent to $869 million as its same-store sales declined 13.7 percent. Online retail sales fell 2 percent to $29.6 billion in third quarter.


Signet’s 3Q Sales -3%

Signet Group’s third-quarter sales fell 2.5 percent to $614 million and its same-store sales decreased by 1.9 percent. Sales in the U.S. marketplace, which represent 75 percent of group sales, totaled $459.3 million, with same-store sales down 2.4 percent. Signet’s U.K. sales rose 4.4 percent in local currency, but in dollars, sales fell 4.8 percent to $154.3 million. Same-store sales in the U.K. were flat. The Christmas season sales outlook remains "very uncertain" on both sides of the Atlantic, according to the company.


Blue Nile's 3Q Sales +2%, Profits +10%

Blue Nile's third quarter sales rose 2.4 percent to $66.9 million and profits rose 10.2 percent to $2.6 million. International sales grew 27.5 percent to $8.8 million. Sales for the U.S. operations fell 0.7 percent to $58.1 million. Gross profit improved 180 basis points to 22.1 percent. Blue Nile cited gross margin improvement due largely to better product sourcing in both diamonds and jewelry.


Black Friday '09 Projected to Draw More Shoppers

ICSC and Goldman Sachs expect U.S. consumers to spend an average of approximately $543 on gifts during this year’s Christmas season, as well as another $133 on gift cards. Consumers expect to spend more this year on gift purchases than they did in 2008, but less on gift cards. Black Friday, which falls on November 27, will be more important to shoppers than it was in 2008, with 16 percent of ICSC’s survey respondents expecting to begin their holiday gift shopping that day, compared with only 10 percent in 2008.


U.S. Online Christmas Sales to Reflect Healthy Bump

Online retail sales during the upcoming U.S. holiday season should reach $44.7 billion, which represents a healthy increase of 8 percent from 2008, according to the latest forecast from Forrester Research. Online sales in the U.S. grew only 5 percent in 2008 for the November and December period. This year, retailers will manage to the bottom line, which will change some of the tactics they have employed in the past, such as free, unfettered shipping and prolonged discounts. Consumers can also expect limited shipping options and limited-time sales online.


Rapaport Broadcast

The Everlon Diamond Knot commercial will launch in the U.S. on November 16, which you may view in this broadcast. See how the industry's biggest diamond campaign is already unfolding across the Internet at select online stores. WATCH NOW


Court Dismisses $60M Suit Against Yehuda

Jurors dismissed Blue Nile's $60.1 million claim against The Yehuda Diamond Company, reaffirming Yehuda Diamond's right to compare the prices of its clarity-enhanced diamonds with those of the untreated diamonds sold at bluenile.com. Blue Nile filed the suit to prevent Yehuda Diamond from comparing these prices, but Yehuda Diamond argued that comparisons were in the best interest of consumers.


Gembrooke Opens for Business

Gembrooke opened as a new trading firm based out of Short Hills, New Jersey, and is offering a Solenza Diamond brand to select fine jewelry retailers in the U.S. and Canada. The Solenza brand offers a loose diamond program and a full collection of Solenza Jewelry. The company was founded by Joseph Srodawa, the former managing director for Overseas Diamonds and the isee2 brand in North America.


FTC Delays Red Flags Rule Enforcement

The Federal Trade Commission (FTC) delayed enforcement of the Red Flags Rule until June 1, 2010, which affords jewelers covered by the rule more time to develop their Identity Theft Prevention Programs. Any jeweler that is a “creditor” with “covered accounts,” as those terms are defined by the rule, must develop a program by the new June 1, 2010 deadline. The Jewelers Vigilance Committee (JVC) has created a Red Flags Rule Compliance Kit, which is sponsored by GE Money. For more information, visit www.jvclegal.org.


Zale Shares Slip

Shares in Zale slid by double digits following the release of its earnings report, which discussed its cooperation with a Securities and Exchange Commission (SEC) probe. Zale shares fell 25.98 percent on October 30 to close at $4.73 in New York. Though the jewelry chain’s shares have gained slightly this week, they have traded in a range of $4.84 and $5.27, a decline of 67 percent from one year ago.


MINING:

ALROSA Reduces Debt

ALROSA reduced its fiscal loss in the third quarter to $303 million from $505 million in the second quarter, based upon Russian Accounting Standards. ALROSA predicts that it will close its fiscal year 2009 with a net profit of $58.5 million, down from a net profit of $130.1 million in 2008. Meanwhile, the proceeds from ALROSA's recent $620 million sale of its gas assets were used to pay down debt, enabling the mining giant to reduce it by $1 billion so far in the current quarter.

ECON WATCH:
For the week ending November 5, 2009

	Nov. 5	Oct. 29	Chng.
$1 = Euro	0.671	0.673	-0.002
$1 = Rupee	46.94	46.86	0.1
$1 = Israel Shekel	3.78	3.77	0.01
$1 = Rand	7.61	7.82	-0.21
$1 = Canadian Dollar	1.06	1.07	-0.01
Precious Metals
Gold	$1,089.80	$1,047.10	$42.70
Platinum	$1,355.00	$1,337.00	$18.00
Stock Indexes				Chng.
BSE	16,063.90	16,052.72	11.18	0.07%
Dow Jones Avg.	10,006.34	9,962.58	43.76	0.44%
FTSE	5,125.64	5,137.72	-12.08	-0.24%
Hang Seng	21,479.98	21,264.99	214.99	1.01%
S & P 500	1,066.63	1,066.11	0.52	0.05%
Yahoo! Jewelry Index	1,124.83	1,120.68	4.15	0.37%
USA
Birks & Mayors	$0.57	$0.59	-$0.02	-3.39%
Blue Nile	$58.62	$62.09	-$3.47	-5.59%
Charles & Colvard	$0.58	$0.57	$0.01	1.75%
DGSE Companies, Inc.	$1.70	$1.52	$0.18	11.84%
Fuqi International	$21.27	$22.15	-$0.88	-3.97%
JCPenney	$30.28	$34.31	-$4.03	-11.75%
Kohl's	$55.91	$58.23	-$2.32	-3.98%
Lazare Kaplan	$2.50	$2.50	$0.00	0.00%
LJ International	$3.15	$3.52	-$0.37	-10.51%
Macy's	$18.03	$18.37	-$0.34	-1.85%
Man Sang	$2.60	$2.42	$0.18	7.44%
Movado Group	$11.28	$10.98	$0.30	2.73%
Nordstrom	$33.91	$32.17	$1.74	5.41%
Saks	$5.90	$5.93	-$0.03	-0.51%
Signet	$26.69	$25.71	$0.98	3.81%
Sotheby's	$18.15	$16.34	$1.81	11.08%
Tiffany	$41.27	$40.80	$0.47	1.15%
Wal-Mart	$51.24	$50.40	$0.84	1.67%
Zale	$4.88	$6.39	-$1.51	-23.63%
EUROPE
Bulgari	€5.85	€5.86	-€0.01	-0.17%
Bijou Brigitte	€117.00	€114.90	€2.10	1.83%
Damiani	€1.09	€1.09	€0.00	0.00%
LVMH	€71.32	€71.00	€0.32	0.45%
Pinault P-R SA	€79.01	€74.66	€4.35	5.83%
Richemont SA	CHF 29.34	CHF 29.56	-CHF 0.22	-0.74%
Swatch Group	CHF 249.80	CHF 244.90	CHF 4.90	2.00%
Theo Fennell (pence)	49.50	49.00	0.50	1.02%
INDIA (rupee)
Classic Diamond	20.35	20.05	0.30	1.50%
Gitanjali Gems	112.05	113.80	-1.75	-1.54%
Goldiam Int'l	34.35	36.15	-1.80	-4.98%
Rajesh Exports	77.05	75.65	1.40	1.85%
Ren. Jewellery	40.65	43.20	-2.55	-5.90%
Su-Raj Diamonds	45.70	44.20	1.50	3.39%
Titan	1,271.50	1,230.60	40.90	3.32%
Zodiac JRD	23.75	25.20	-1.45	-5.75%
Suashish Diamonds	306.45	327.70	-21.25	-6.48%
NEW ZEALAND
Michael Hill	NZD 0.66	NZD 0.65	NZD 0.01	1.54%
MINING STOCKS
CANADA
Harry Winston	CAD 9.65	CAD 9.59	CAD 0.06	0.63%
Mountain Province	CAD 2.91	CAD 3.07	-CAD 0.16	-5.21%
Peregrine Diamonds	CAD 2.25	CAD 2.37	-CAD 0.12	-5.06%
Rockwell Diamonds	CAD 0.07	CAD 0.07	CAD 0.00	0.00%
Shore Gold	CAD 0.83	CAD 0.88	-CAD 0.05	-5.68%
Stornoway Diamond	CAD 0.33	CAD 0.31	CAD 0.02	6.45%
True North Gems	CAD 0.09	CAD 0.10	-CAD 0.01	-10.00%
UK (pence)
African Diamonds	35.50	30.60	4.9	16.01%
Anglo American	2,344.00	2,300.00	44.0	1.91%
BHP Billiton	1,690.00	1,720.00	-30.0	-1.74%
Firestone Diamonds	32.35	31.30	1.1	3.35%
Gem Diamonds	245.00	241.20	3.8	1.58%
Gemfields	6.50	6.89	-0.4	-5.66%
Mwana Africa	13.38	12.50	0.9	7.04%
Namakwa Diamonds	34.01	35.50	-1.5	-4.20%
Petra Diamonds	70.50	73.75	-3.3	-4.41%
Rio Tinto plc	2,884.11	2,786.00	98.1	3.52%

INDIA MARKET REPORT:

POLISHED: Improved activity. Due to shortages in most categories sellers are asking for higher prices.
Round
-1 point:	Good demand: -$250 whites.
-2 point:	Good demand: -$250 whites.
2-7 point:	Good demand: +$100 whites.
8-18 point:	Fair demand: +$300 whites.
20 points:	Fair demand: +$600 whites.
25 points:	Fair demand: +$700 whites.
33 points:	Fair demand: +$900 whites.
50 points:	Good demand: +$2000 whites.
	Fair demand: $500-$700 whites
75 points:	Fair demand: +$2000 & $700-$900 whites.
1 carat+:	Good demand: +$1500 whites.
Princess
-3 point:	Good demand: $300-350 whites.
	Fair demand: $200-$275 whites.
+3 point:	Good demand: $350-$400 whites.
	Fair demand: $200-$300 whites.
+9-18 point:	Good demand: +14 pts $550-$600 whites.
	Fair demand: $250-$350 whites.
20 point:	Fair demand: $700-$750 whites.
25 point:	Fair demand: $800-$850 whites.
50 point:	Good demand: $1600-$1,800 whites.
75 point:	Fair demand: $1,000-$1,200 whites.
1 carat+:	Good demand: +$1,500 whites.
Marquise
-6 point:	Good demand: $400-$500 whites.
	Fair demand: $250-$350 whites.
+7-18 point:	Good demand: $600-$700 & +14 pts $800-$850 whites.
	Fair demand: $250-$400 whites.
20 point:	Fair demand: $900-$1,000 whites.
25 point:	Fair demand: $1,100-$1,200 whites.
33 point:	Fair demand: $1,300-$1,500 whites.
50 point:	Fair demand: $1,600-$1,800 & $600-$700 whites.
75 point:	Fair demand: $1,100-$1,400 & $2,600-$2,800 whites.
1 carat+:	Good demand: $300-$600 & +$1,000 whites.
Tapers & Baguettes
	Good demand: $600-$800 +5mm whites. $250-$325
	2mm-2.5mm whites; $350-$400, 2.5mm-3mm whites;
	$400-$450 3mm-4mm, $500-$600 4mm –
	5mm & $175-$250 +2mm-3mm whites.
ROUGH: There is some demand in the local market but highly desirable goods are scarce and high asking prices are holding back activity.
1-5 point:	Good demand: $80- $120 makeables; $100-$180 crystals.
	$35-$70 makeables.
	Fair demand: $7-$20 & $40-$80 OW TTLB & TTLC.
6-20 point:	Good demand: $150-200 crystals; $80-$170 makeables.
	Good demand: $60-$110 fancy shapes;
	Fair demand: $40-$50 clivage;
	$50-$90 OW TTLC & TTLB rounds.
21-50 point:	Good demand: $200-260 makeables; $100-$180 & $220-$280 crystals.
	Good demand: $80-$190 fancy shapes;
	Fair demand: $95-$200 rounds; $50- $90 clivage.
	Fair demand $20-$40 OW TTLC & TTLB.
0.51-1.00 carat:	Good demand: $150-$300 makeables;
	$120-$240 & $270-$440 crystals.
	Good demand: $70-$100 makeables;
	Good demand $90-$200 fancy shapes;
	Fair demand $60-$90 OW TTLC & TTLB; $40-$70 clivage;
1.01-2.00 carat:	Good demand: $200-$550 rounds;
	$250-$700 crystals; $90-$130 clivage; $180-$360 all fancy shapes.
	Fair demand $140-$180 OW TTLC & TTLB.
2.01-3.00 carat:	Good demand: $250-$1,000 makeables; $350-$1,300 crystals;
	$400-$800 fancy shapes.
	Fair demand: $250-$325 clivage; $100-$325 flats & TTLC & TTLB
	$350-$800 OW.
5.00 carat+:	Good demand: $1,000+ makeables, crystals & all fancy shapes till L color.
Mixed Lot:	Good demand: $2-$40.

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