Pricing in the Past
Historically the diamond industry has been a very closed and impenetrable one, known for lack of price transparency. Diamond pricing was dictated not by the open, competitive market structure of supply and demand, but by a few companies with vast monopolistic stretch. This caused a stable rise in diamond prices, free of fluctuations.
Harry Oppenheimer, Chairman of De Beers from 1960-1983, once explained:
“A degree of control is necessary for the well-being of the (diamond) industry not because production is excessive or demand is failing but simply because wide fluctuations in prices which have, rightly or wrongly, been accepted as normal in the case of most raw materials, would be destructive of public confidence in the case of a pure luxury such as gem diamonds, of which large stocks are held in the form of jewelry by the general public. Whether this measure of control amounts to a monopoly I would not know, but if it does it is certainly a monopoly of a most unusual kind. There is no one concerned with diamonds, whether as producer, dealer, cutter, jeweler or customer who does not benefit from it. ”
Despite the oddity of this monopolistic structure, the price control has allowed customers to feel secure that their diamonds will maintain their value. The big downside of the monopolistic nature of the industry was the lack of price transparency. The average consumer was not aware of how diamond prices were set or where they stood at a given time on the market. Customers were unable to make any comparative analysis, except between one retailer to another, and were mostly forced to accept the offered retail price.
For investment purposes price transparency is crucial. Diamonds couldn’t be treated as an investment because the investor didn’t know the true value of his investment.
Current Diamond Pricing
The new century has brought many changes to the diamond industry. The monopolistic control of the industry has declined, there are many new players in the industry, which brings some kind of market competitiveness. Most importantly, diamond pricing information has become much more available to the public. There are many online platforms nowadays which offer diamond prices, such as Rapaport List, IDEX Online and others.
Today the price discovery of polished stones is much easier and new platforms allow traders to have a better understanding of the prices in the market. Price discovery is a fundamental requirement for investment. You need to know market prices in order to assess an investment and make an informed decision about buying or selling.
Astteria strives to provide transparent and objective information on diamond pricing, in order to make your investment process easier and more certain.