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Rising polished prices boost sentiment

Diamond markets improved in August as governments eased Covid-19 restrictions and dealers sought to fill specific orders from jewelers. Indian manufacturers increased polished production to fill shortages in certain categories.

Polished prices firmed. The RapNet Diamond Index (RAPI™) for 1-carat diamonds rose 3.2% in August. It has fallen 0.4% since the beginning of the year.

Rough trading increased after De Beers reduced prices by an estimated 6% to 8% for 1-carat and larger rough. Alrosa reportedly lowered prices by a similar margin for a broader range of its rough supply.

The reductions were the first adjustments the major mining companies had made since the coronavirus outbreak. They had previously kept prices stable to support the industry with low supply when the market slumped during the pandemic. The companies made the changes in August following an improvement in polished trading during the prior two months. Certain categories of RapSpec A3 and better goods are seeing shortages due to factories operating at significantly reduced capacity since April.

With rising expectations for the holiday period, manufacturers are buying rough to prepare for seasonal polished demand. There are concerns that continued strong rough buying will squeeze liquidity and lead to an oversupply of polished. There remains a large volume of lower-quality goods on the market. RapNet listings contained more than $6.3 billion worth of diamonds as of September 1.

Jewelers are adapting to the Covid-19 selling environment as consumers get used to social distancing and safety restrictions. Customers are also buying more jewelry online. However, retailers are exerting caution due to second and third waves of infections across the globe. Jewelers are carefully managing their inventory, and trading volumes remain well below pre-pandemic levels.

Courtesy - Rapaport

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