Hidden Gem of an Economic Indicator? Diamond Sales

Posted by: Lauren Young on March 26, 2009

Earlier today I wrote about our chief economist’s call that the stock market has bottomed. A housing guru also says a real estate bottom may be in sight. Apparently, the diamond market is starting to shine again, too.

I’ve been monitoring the gold and gems demand recently and interviewing people who work in that industry. A week ago, when I spoke to esteemed estate dealer Andrew Fabrikant of Fabrikant Fine Diamonds, he said people continue to sell gold to cash in on strong prices, but gems have lost their luster. That’s changed: “All of the sudden people are buying diamonds,” he told me this afternoon.

This morning Fabrikant says he had a Eureka moment. He came to the realization that a shift may be underway. For example, he cannot recall a client inquiring about a diamond engagement ring in the month of January. In the past week, however, three clients have asked about engagement rings and “another guy from Colorado just asked about buying a gift for his wife.”

“I just sold a lot of stuff to Europe, and it is big numbers, in the hundreds of thousands of dollars,” he says. The buyers are private clients as well as European dealers.

Diamond prices, while still weak, seem to be stabilizing, Fabrikant says. “The diamond cutters are getting more business. Before they were sitting around playing cards, but now they are starting to cut again.”

More good news for the jewelry industry: This week Citi Investment Research analyst Mark S. Mahaney upped his price target for online jewelry retailer Blue Nile (NILE). The analyst also said Tiffany’s (TIF) fourth-quarter results signal improving trends. On Monday, Tiffany reported its fourth-quarter profit dropped more than 75% but still beat Wall Street’s estimates.

Fabrikant says people are buying blingy gifts, even though they may not be spending as much as they would have a year ago. “Maybe people feel like the bottom has been reached, or that some of them aren’t as worse off as they thought they were going to be,” Fabrikant says. “Love’s not dead yet.

Have you seen any signs that the economy is turning around? What about unemployment, real estate, or the stock market? Any pearls (pun intended) of wisdom you can share will be illuminating.

Reader Comments

The Mad Hedge Fund Trader, San Francisco, CA

March 27, 2009 12:08 PM

The diamond market has crashed. Recession plagued wholesalers and retailers in the US, which account for half of world demand, are glutted with stagnant inventory, and have watched helplessly as prices dropped a third from the 2007 peak. De Beers has shuttered its Botswana mine, which supplied a quarter of the world’s rough sparklers. Diamonds account for a third of the African country’s GDP and 80% of its foreign exchange income, and now Standard and Poor’s is threatening a sovereign ratings downgrade. Was there ever a better time to drop down on one knee and make that marriage proposal?www.madhedgefundtrader.com.

Robert Laughing

March 28, 2009 12:29 PM

Diamonds, so plentiful, they could be sold like M&Ms, but through clever huckstering and guilt tripping, countless men are forced? compelled? extorted? into buying them, in order to show how MUCH, they 'value' their intended! Gold has tangible value that lasts...diamonds? Truly 'manufactured.'

Michael Cohen

April 1, 2009 9:01 PM

Growing Incidence of Undisclosed Treated Diamonds in Australia

DCLA has seen an alarming increase in the number of treated diamonds being submitted as natural diamonds to the laboratory for certification.

It should first be said that diamond treatments are neither good, nor intrinsically bad in and of themselves. There is nothing wrong with buying a treated diamond, provided that the treatment is fully disclosed and that you pay the appropriate price for the diamond. Because of their lower cost and value, treated diamonds can allow a person to buy a diamond that appears to be of a higher quality than it truly is.

However, too often the presence of such diamond treatments is concealed. Whether this deception is by intent or negligence, such concealment is tantamount to fraud.

Not only does artificially treating a diamond significantly reduce its value, but most diamond treatments are unstable and reversible. For this reason, all internationally accepted rules for diamond grading forbid the certification of treated diamonds. An extremely disturbing discovery just recently in the DCLA Laboratory was that of a coated diamond accompanied by a certificate from a supposedly legitimate Australian ‘laboratory’.

Members of the diamond industry have a responsibility to consumers to convey accurate and transparent information, and each individual that handles a diamond as it moves down the diamond pipeline from the mines should be held accountable for making known any treatments that a diamond has undergone.

It is deceptive and unfair to fail to disclose treatment of a diamond when it has a significant effect on a diamond’s value. In its pursuit of consumer protection, DCLA is offering a ‘Diamond Amnesty’ for diamond owners Australia-wide – any diamond brought in with its matching diamond grading certificate will be verified for grading accuracy and tested to ensure that it is natural and free of treatments. This service will be provided free of charge.

Diamond Buyers

April 17, 2009 12:46 AM

Hi,
If you’re looking to buy a diamond and thought of buying something locally produced in Australia, what are your options? Unfortunately, your option are limited. According to Wiki, there are only three diamond mines in Australia and only one has been branded, Arygle.
Diamond Buyers

Michael Cohen

April 26, 2009 9:06 PM

DCLA identifies Treated Pink Diamond

Recently, a pink coloured diamond weighing 0.70ct was submitted to DCLA laboratory for certification and colour authentication. The colour was described as 3 PP on a diamond report issued by another Australian-based laboratory.

After routine examination however, DCLA discovered that when the diamond is viewed under high magnification with reflected diffused light, a patchy iridescent coating is visible on the surface. This coating is also easily visible on the pavilion facets of the diamond when viewed through the table. However, when the diamond is observed under magnification with regular diffused light, the pink coloration appears evenly distributed, particularly when viewed face up.

The pink colour is the result of a coating rather than from natural lattice defects in natural pink diamonds. Surface coating is the process of adding a thin layer of coloured foreign material to all or part of a gemstone's surface, with the intent of either masking the underlying body colour or enhancing a desirable colour. Most often, this coating is applied to the pavilion and/or girdle of the diamond; the way that light refracts as it passes through a diamond creates the illusion of uniform colour distribution.

The durability of diamond coatings vary considerably, depending on materials used and methods of coating applied. Most recent advances in technology employ a very thin optical or chemical film which is more durable than older methods, but still readily worn away by heat, scratching, abrasion, polishing, and just everyday wear.

Coating is a deceptive practice; we do not know the number of coated pink diamonds which have entered the marketplace, but the DCLA has seen a number of treated stones of late. Of particular concern is when such treated diamonds are accompanied by seemingly legitimate reports or paperwork.

DCLA screens every diamond submitted to the laboratory for all known treatments, and will not issue a diamond certificate for treated or synthetic diamonds.

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About

Bloomberg Businessweek’s Ben Steverman focuses on the latest moves in financial markets and emerging trends in stocks, bonds, and funds, always with an eye toward giving readers a better understanding of the sometimes confusing and often chaotic world of money. Standard & Poor’s senior index analyst Howard Silverblatt will also provide his take on companies’ finances and the markets. Voted one of the “Top 100 Finance Blogs” in 2007.

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