V-Shaped Economy: The Year Diamond Prices Sank and Rebounded

In what has been industriously described as “an unusual year”, diamond prices took a beating, only to make a near full recovery in a matter of months. This may come as a surprise to many who mourned the demise of the diamond industry, but this was no surprise for industry insiders.

As retail stores closed in China, then in the US and elsewhere, the diamond industry entered near hibernation. This is an odd state for a mid-size industrial pipeline, one that delivers its effects. In the case of the diamond industry, one outcome was a slow yet steady decline in diamond prices starting in February.

Polished diamond price index for January-December 2020 showing hoe polished diamond prices V-Shaped recovery — by Edahn Golan
Polished diamond price index for January-December 2020 showing hoe polished diamond prices V-Shaped recovery — by Edahn Golan

In July, a month after jewelry retail sales started to rise, polished diamond prices followed. And nothing has stopped them since.

As consumers around the world rushed to spend the money they didn’t get to spend on travel, global jewelry sales only climbed, pulling diamond prices with them.

The trajectory and circumstances were so clear that after seeing how prices increased in October, the only thing left to say was “expect higher diamond prices this holiday season”. The result was a V-shaped recovery, as the graph above shows.

In December, jewelry sales closed at record highs. This means that, in January, ahead of Valentine’s Day, retailers will be busy replenishing their inventories. A continued rise in polished diamond prices is expected again.

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