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Market Comments 6/21/2012

Jun 21, 2012 6:00 PM  
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Global markets quiet with increasing concern about global recession. Hong Kong show opens with low expectations as Far East demand remains sluggish. Rough prices declining with DTC boxes selling at discounts and some sightholders refusing to take goods. India remains highly problematic with tight liquidity and weak local demand. U.S. remains best market for polished. ALROSA 1Q sales +26% to $1.1B, net profit +8% to $386M with average prices for gem-quality stones +24% to $184/ct. India’s May polished exports -44% to $1.3B, rough imports -20% to $1.1B. Blue Star founder Vasantlal Laxmichand Mehta passes away.

Demand for fancy shape diamonds improving with reductions in discounts. Price conscious consumers buying more fancy shapes as their prices appear more attractive than rounds. Manufacturers are shifting production back to fancies in light of shortages. Square cuts doing better than curves (Pear Shapes, Ovals, Marquise etc.). Fancy shapes remain less liquid than rounds and may trade at significantly higher discounts for medium to less-well-shaped diamonds. Very large (5 ct.+) top-quality well cut fancies attracting some investment demand.

Global Markets

United States: Independent retailers are growing more concerned about the economy ‎‎and are keeping their inventories slim. Higher-end jewelry sales have weakened slightly, ‎even though the luxury ‎market overall is steady. The wholesale market is stable but the ‎volume of trade remains below ‎levels of a year ago. Buyers are looking for more ‎affordable price points, which are ‎spurring demand for SI and lower clarity goods as well ‎as for fancy shapes. There are ‎prevailing shortages in these category stones.‎

Sentiment in Antwerp remains weak as the Euro-zone crisis has affected ‎confidence in both the polished and rough markets. There is steady demand for G-H, ‎VS-SI1 goods and pique stones are selling well, particularly in the U.S. market. There is ‎also steady demand for fancy shapes. Rough trading is weak with DTC boxes selling at ‎slight discounts. Dealers and manufacturers see little profit opportunities in rough at the ‎moment.   ‎

Trading is somewhat subdued as U.S. demand is expected to slow during the ‎coming summer months and Far East buying has weakened. A large delegation of ‎suppliers traveled to this week’s Hong Kong show but many see it as a necessity to ‎maintain their presence there, rather than a significant selling opportunity. Israeli buyers ‎are traveling there to seek potential bargains from sellers that may be under pressure. ‎Rough trading is weak as prices present very few profit opportunities at the moment for ‎manufacturers or dealers.  ‎

The local rough and polished markets continue to witness restrained trading due to ‎weak demand and tight liquidity. Overall market sentiment is weak. Some sellers are ‎ready to adjust prices as buyers have become extremely cautious. Instability in the ‎rupee-dollar exchange rate is adding to the uncertainty. Demand is focused on VS-SI and ‎lower-clarity stones. Rough goods which yield polished of -11 sieve size, SI and lower ‎clarity, are seeing some trading activity. However, manufacturing remains well below ‎capacity. ‎

Wholesale demand has softened, which some see as a sign of overall market ‎weakness while others attribute it to a cyclically quieter period of the year. Similarly, ‎jewelry retail activity has slowed in the past few weeks. There is rising demand for SI ‎clarity stones as economic uncertainties are making consumers seek more affordable ‎price points. Still, overall demand is focused on certified 0.30-carat to 1.10-carat, D-H, ‎VS-SI goods with Triple Ex and Double Ex cut grade and none-to-faint fluorescence.     ‎

Hong Kong:
The volume of trade remains light in the wholesale market and ‎expectations for this week’s June Hong Kong Jewellery & Gems fair are low. Buyers are ‎hoping that suppliers may be under pressure to meet their liquidity challenges and will ‎soften prices. However, in the run-up to the show, dealers have held their polished prices ‎firm.‎
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