4 ms·

Hang on, De-Beers loses control of the diamond market and then the price goes up? This doesn't look like the market has started being rationally driven by suppl

Hang on, De-Beers loses control of the diamond market and then the price goes up? This doesn't look like the market has started being rationally driven by supply and demand, this looks like someone even more nutty than De-Beers has successfully staged a coup.

privong 12y ago
It could be because DeBeers had the capability (and motivation) to carefully control and stabilize mining operations to keep supplies relative constant. In the absence of that careful control and mediation, if the supply is prone to wild swings the price would swing. I could envision a scenario in which uncertainty in the market for a desired item (without an alternative product) could result in a higher than average price due to speculation and nervousness about the supply.
sogen 12y ago
Heck, I expected, as I'm sure everyone else, that the chart would show prices going down, not UP!?! As others commented, crazy times for something of such little value...
pyre 12y ago
Some of those high prices seem like the result of speculation, or people pouring their money into 'something physical' the same way that market volatility sometimes ends up with a rise in gold prices.
- hrktb 12y ago
  I thought diamonds have little to no resale value, or is there other ways to speculate or use them as a something valuable ?
  - zaroth 12y ago
    How can a diamond be "used"? I think it's only the person offering to buy it trying to convince you of this. Diamonds are cheap and easy to appraise, and with laser etching easy to identify. I buy all my ice with AGL certs off eBay. There are more degrees of freedom than with something like gold coins, so diamonds aren't fungible. It adds complexity but I don't think it hurts resale that badly. If the resale market were so much cheaper, that's where everyone would buy their stones, right?
mikebabineau 12y ago
The article attributes the increase in demand to Asia: "De Beers liquidated their stock pile from 2000 to 2004, resulting in a modest decline in diamond prices as the liquidation supply more than offset new demand coming out of Asia" Here's an FT article on the subject: http://www.ft.com/intl/cms/s/0/c8b7e3de-cf33-11e0-b6d4-00144feabdc0.html http://www.ft.com/intl/cms/s/0/c8b7e3de-cf33-11e0-b6d4-00144...
fragsworth 12y ago
It's unclear if the graph is adjusted for inflation. If you consider currency inflation since 1987, and that graph hasn't adjusted for it, diamond prices may have gone down significantly.
bluedevil2k 12y ago
Demand has increased for many reasons - more companies have access to rough diamonds, Asian consumers (especially Chinese middle class) are becoming believers in the "a ring means engagement" marketing campaign, and the general improvement in the world economy has led to an increase.
maaku 12y ago
It isn't always the cartel's goal to drive prices up. In the case of de Beers, they wanted price stability. They went out of their way to avoid increasing prices more than the desired amount at many points in the history of consumer diamonds. There is no reason to believe that the price of diamonds at the time De Beers lost control was not at approximately what the market could bear, especially now that they have liquidated their supply-controlling stockpile. Growing demand from developing countries and speculative pressures that would not have existed before could certainly account for increasing diamond prices.

privong 12y ago

It could be because DeBeers had the capability (and motivation) to carefully control and stabilize mining operations to keep supplies relative constant. In the absence of that careful control and mediation, if the supply is prone to wild swings the price would swing. I could envision a scenario in which uncertainty in the market for a desired item (without an alternative product) could result in a higher than average price due to speculation and nervousness about the supply.

sogen 12y ago

Heck, I expected, as I'm sure everyone else, that the chart would show prices going down, not UP!?! As others commented, crazy times for something of such little value...

pyre 12y ago

Some of those high prices seem like the result of speculation, or people pouring their money into 'something physical' the same way that market volatility sometimes ends up with a rise in gold prices.

hrktb 12y ago
I thought diamonds have little to no resale value, or is there other ways to speculate or use them as a something valuable ?
- zaroth 12y ago
  How can a diamond be "used"? I think it's only the person offering to buy it trying to convince you of this. Diamonds are cheap and easy to appraise, and with laser etching easy to identify. I buy all my ice with AGL certs off eBay. There are more degrees of freedom than with something like gold coins, so diamonds aren't fungible. It adds complexity but I don't think it hurts resale that badly. If the resale market were so much cheaper, that's where everyone would buy their stones, right?

mikebabineau 12y ago

The article attributes the increase in demand to Asia: "De Beers liquidated their stock pile from 2000 to 2004, resulting in a modest decline in diamond prices as the liquidation supply more than offset new demand coming out of Asia" Here's an FT article on the subject: http://www.ft.com/intl/cms/s/0/c8b7e3de-cf33-11e0-b6d4-00144feabdc0.html http://www.ft.com/intl/cms/s/0/c8b7e3de-cf33-11e0-b6d4-00144...

fragsworth 12y ago

It's unclear if the graph is adjusted for inflation. If you consider currency inflation since 1987, and that graph hasn't adjusted for it, diamond prices may have gone down significantly.

bluedevil2k 12y ago

Demand has increased for many reasons - more companies have access to rough diamonds, Asian consumers (especially Chinese middle class) are becoming believers in the "a ring means engagement" marketing campaign, and the general improvement in the world economy has led to an increase.

maaku 12y ago

It isn't always the cartel's goal to drive prices up. In the case of de Beers, they wanted price stability. They went out of their way to avoid increasing prices more than the desired amount at many points in the history of consumer diamonds. There is no reason to believe that the price of diamonds at the time De Beers lost control was not at approximately what the market could bear, especially now that they have liquidated their supply-controlling stockpile. Growing demand from developing countries and speculative pressures that would not have existed before could certainly account for increasing diamond prices.