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Market Comments 7/28/2011

Jul 28, 2011 6:00 PM  
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High hopes for next week's Mumbai show to signal strong post-summer polished trading. Mining companies report record 1H results as high rough prices compensate for lower volume sold: De Beers rough sales +33% to $3.5B, profit +72% to $694M, production flat at 15.5M cts., prices +35%; ALROSA sales +9% to $2.2B, profit +450% to $598M, production +8% to 19M cts., prices +41%; Gem Diamonds rough sales +84% to $194M as average Letseng prices +77% to $3,052/ct. Zimbabwe Treasury reports 1H Marange production of 2.329M cts., diamond exports of $103.9M. LVMH 1H watch and jewelry sales +30% to $835M. Bulgari 1H jewelry sales +44% to $347.5M. Gold prices hit record $1,629/oz.

Global Markets

United States:
The traditionally quiet summer season continued as many wholesalers took vacations in July, but trading activity still showed gains over last year. Confidence remains that the end-of-year Christmas season will be solid despite deep concerns about a possible U.S. debt default in early August. Retail sales are dominated by bridal goods as consumers continue to hold back spending on quality fashion jewelry through the recovery. Retailers report that round, 1.5-carat to 2-carat, H-J, SI1 stones are the most popular items.

Dealers have been pushing to close deals ahead of the August summer break while overall trading is relatively quiet but stable. The Antwerp bourses are scheduled to close for three weeks next week and will reopen in late August. There is strong demand for good quality, very small diamonds, in VS+ clarities, driven by demand from luxury jewelers using these stones in other products such as watches. Rough trading is stable following the price increases implemented earlier in the month.

Trading continues to be relatively quiet with the approach of the summer break. The bourse officially closes from August 2 to August 22. Polished dealers remain upbeat and confident for a strong second half of the year, beginning after the break. Growth in demand is being driven by Far East markets and is focused on VS2-SI1 stones. Rough traders have grown cautious following the recent price hikes.

A sense of normalcy has returned to Mumbai following the explosions which hit two weeks ago. Many are focused on preparing for the India International Jewellery Show (IIJS) that starts on August 4. Expectations are high for the show as confidence is growing for a strong Diwali season in November. Current trading is down slightly as sellers appear to be willing to negotiate on price and are waiting to assess price trends at the show. Demand is stable for traditional Indian small items of star and melee, SI and pique stones, and for 0.3-carat to 3.00-carat stones. Rough trading has grown slightly more cautious following the July price increases.

Wholesale demand is stable but quiet through the summer season and as many buyers have grown cautious about high polished price levels. Similarly, retailers have experienced a seasonally slower period but report growth over the same period last year. Most appear confident that the market will pick up again in late August leading to a strong October Golden Week season.

Hong Kong:
The relative summer quiet continues with some growth over last year driven by tourists from mainland China. Trading is expected to pick up toward mid-August as dealers start to prepare for the September Hong Kong show. Carat sizes remain the mainstay items despite growing price resistance from buyers. There is some downsizing and lowering of color and clarity to move to more affordable price points.   

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