What’s Behind Contradictory Trends in the US Diamond Market? 

The US diamond wholesale market is in a mixed state. Retail demand has seen a steady few months. Consumer sales of natural-diamond jewelry and loose stones rose 8.5% year on year in July, according to data provider Tenoris. Yet dealers are reporting slower purchases by retailers than in past years.  

Behind the contradictory situation appears to be a change in the way retailers buy. There is limited appetite to take on inventory, as price declines have made jewelers worry that the diamonds in their safes will be worth less in a few months. Memo has taken on a greater role with retailers seeking to minimize risk. 

The contradiction between stable consumer demand and shaky dealer sentiment comes down to retailers’ current inventory situation, explained David Bonaparte, CEO of Jewelers of America (JA). 

At retail, higher-end luxury stores are seeing steady diamond sales, while higher-volume companies are struggling more. However, “dealers in New York are quiet right now, and I think that’s a result of the retailers being well stocked at the moment,” Bonaparte continued. “My sense is that there’s less buying right now, even though [consumer] sales are strong, because inventories are there. But that is typical in the summer.” 

US diamond inventories have risen slightly over the summer, RapNet figures show. The number of US-located round diamonds on RapNet across a chosen range of sizes increased 32% from around 21,200 on March 1 to some 28,000 stones on September 1 (see graph 1). This is for 0.30- to 0.39-, 0.50- to 0.69-, 0.70- to 0.89-, 1- to 1.49-, 2- to 2.99- and 3- to 3.99-carat, D to M, flawless to I1, RapSpec A3+ diamonds.

However, this was a gentler rise than in India, where the number of listed diamonds in this range jumped from around 60,000 stones on March 1 to almost 160,000 on September 1. This reflected an oversupply in India as factories resumed production after last year’s voluntary freeze on rough imports. The percentage difference between inventory levels in the two countries rose to its highest level in two years (see graph 2). The US trade is in a healthier inventory position than India, as dealers can be pickier about what goods they accumulate.

Buying opportunity 

As for whether that inventory is moving, current low price levels have created an opportunity for buyers to acquire stones outright, argued Andrew Rickard, vice president of operations at Rochester, New York-based wholesaler RDI Diamonds. 

“We are seeing retail buyers coming to the table and looking for deals,” he commented. This demand focuses on 1- to 4-carat, F to J, VS1 to SI2 diamonds in round, oval, radiant, cushion and marquise shapes, he said. Retailers that maintain their strategy of buying on demand only are likely losing out on sales, Rickard cautioned. 

“Those that like to own more inventory [as opposed to] calling diamonds in [on memo in response to specific interest from customers] are benefiting from that strategy,” he added. 

“They are taking advantage of a soft market to purchase their fast movers at lower prices. 

There has been some preholiday improvement since the summer slowdown, but at lower levels than last year, said Nilesh Sheth, president of New York-based polished supplier Nice Diamonds. “Retail stores are conservatively placing orders for stock,” he said. “They are relying on short-term overnight consignments on call basis when they need anything.”

For now, the consensus is that even those in the US who are experiencing slow buyer demand now will see things improve by the fourth quarter. 

“Whatever you think of the current market, Christmas is coming,” Rickard at RDI asserted. “There will be a season one way or another. Those that are better prepared will be in a better position to take advantage of the increased demand they are going to experience.”

Correction, September 12, 2024: The 8.5% increase in sales of natural-diamond jewelry and loose stones was for July, not for August, as stated incorrectly in an earlier version of this article.

Image: Polished diamonds. (Shutterstock)