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Diamond Blog

15 September 2008
15
Sep
2008
Supply & Demand In The Diamond Market
Posted By Richard Preece




Market prices are dictated by market forces, those being supply and demand. This is the same for all free, competitive markets.

When demand is high and supply is low, prices increase. When demand is low and supply is high, prices decrease.

The diamond market works on this basis. Imagine the diamond market is a triangular shape. Towards the bottom are diamonds of 0.10ct / 0.20ct, all of which are abundant in supply. The further you move up the triangle, the less supply there is. At the top of the triangle (ie the point) would be diamonds of, say, 5ct or more, of D-Flawless quality, which are incredibly rare. Whilst this diamond is beyond the means of the mass market, there is still sufficient global demand to keep the price high. After all, if you had unlimited money, the things you wanted to buy would probably be those most sought-after and rare. This is why you find that the larger the diamonds are, the greater the exponential price - that is to say that the price of a one carat diamond is more than the equivalent price of 2 x half carat diamonds.

What else affects the price of a diamond engagement ring. Well, the currency markets play their part. All diamond trading on a global scale is carried out in US$. When the is strong against the US$, prices in s to the UK public become cheaper. Vice-versa, when the is weak against the US$, then prices to the UK public become more expensive. Don't think, however, that it is therefore better to purchase from the US.....there is still import duty and VAT to pay for incoming goods into the UK....but that is another story.

The price of precious metals also plays its part. Of course, the major cost of the price of an engagement ring is the diamond itself. However, the precious metal ring shank also has a cost to be considered, especially if it is made in platinum for example. Since the beginning of 2008, the price of platinum has increased by 40%, due to a shortage of supply in the market and increasing demand globally (this was because there was a problem with power outages in South Africa earlier in the year, meaning it was difficult to mine platinum). As things stand today, the platinum price has stablised, although with it now being the most popular of all the precious metals, it is likely that platinum will increase again in the very near future.

The price of diamonds and engagement rings, therefore, is constantly fluctuating. What remains clear, however, is that the larger and better quality diamonds remain a safe place to invest your money, regardless of the timing.

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