It’s a good time of year to talk about ice, isn’t it? August is, for people living in the Northern Hemisphere, the hottest month of the year, and there is nothing cooler to think about than ice. Or for this discussion, diamonds.
Just like the rest of us, diamond vendors have been suffering through this recession. Various companies can be seen on the Internet, discussing their loss of profits as prices declined in the recessionary economy. It’s interesting, isn’t it? The price of gold increased because investors were uncertain and wanted the stability and certainty of gold in choppy financial waters.
But by the same token, they have pulled back from buying diamonds. Prices declined, and so one of the world’s hardest substances has been hard for investors to gauge as well.
A certain amount of that is because of the system of buying diamonds in use. The majority of the world’s diamonds are sold through the DeBeers company, which until a few years ago, tightly controlled the market through use of a cartel. These days, things are a little looser on the market, but nonetheless, it’s a secretive and private industry which doesn’t like to open its doors to share information nearly as much as it likes to open doors to let well-heeled buyers in for a purchase.
Be that as it may be, when the recession deepened, many buyers at the retail level (where demand is generated) were simply buying smaller diamonds or not making the purchases at all. So the prices have declined. A few diamond mining companies have teetered or even gone into default because of the market slowdown.
DeBeers has been no different in this downturn. The company has long-standing debt, and asked lenders for leniency (which was granted) for those debts. But the slowdown continues to worry. DeBeers is now restructuring its debt and its ways of doing business to address the concerns.
So what does this mean for consumers? If the demand continues to decrease, the price of diamonds may fall accordingly. There seems to be a recent feeling of hope in the markets that the economy is beginning to turn the corner. But the trickle-down will be long in coming.
If an upturn in diamond sales is not soon realized, then consumers may see deflation come into play. The prices of diamond jewelry could actually decrease and some real deals in diamonds be seen.
Which means that what has been a painful economic recession could turn out to have a bright spot. Or rather in this case, a bit of unexpected sparkle.
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