Diamond Week In Review: 7/29/05

Diamond Prices continue to inch up. Last night, Rapaport News, an Industry Newsletter reported that prices for 1.5 to 5 carat round brilliant diamonds increased by 1-3 percent, encompassing D-J colors and Internally Flawless to SI-2 Clarity Grades.

Increased consumer demand and reduced availability of gem quality diamond rough are cited for these prices increases.

Indications point to additional price increases for smaller carat sizes as well, coming in the next few months.

And you thought a barrel of Oil was expensive!

Ladies: Would You Accept A Diamond From A Math Professor?

A study conducted by two Math Professors, Peter Sozou and Robert Seymour of the Center for Mathematics, University College of London was published this week in the Proceedings of The Royal Academy .

In their experiment they set up courtship as a sequential game and asked the question; What are the characteristics of a good courtship gift?

Their model was structured like this: The male offers a gift to a female; after observing the gift, the female decides whether or not to accept it; she then chooses whether or not to mate with the male. In one version of the game, based on human courtship, the female is uncertain about whether the male intends to stay or desert after mating. In a second version, there is no paternal care but the female is uncertain about the male’s quality. The two versions of the game are shown to be mathematically equivalent.

Expensive investments during courtship does less to convince the woman of the man’s long-term intentions and whether he’ll stick around once there are kids.

Theoretical modeling put courtship as a sequential game, and concluded that an expensive night-on-the-town was a sounder investment than expensive jewelry, according to Sozou and Seymour.

So, Ladies, are these academics on target and which would impress you more about the guy? An expensive one time weekend trip to Paris or a big Diamond Rock?

CNN Becomes Diamond Maven!

Diamonds have that mystical power to make pundits out of novices and wannabees as evidenced by the cogent and detailed advice dispensed by CNN yesterday to consumers on how to buy a diamond.

Comments in parentheses are mine.

The Cable News Network (CNN) website told its readers on July 26th that diamond engagement rings are “getting bigger and bigger” and that “now” is the time to “bet on love and money.”

The story also describes CNN staff engagement rings given during the course of 2005. CNN holds second spot for broadcast news ratings (behind Fox News) in the United States, and its news website receives about 23 million visitors each month.

According to the news report the average price of a diamond engagement ring is $2,600, and that even larger (than 1-carat) rings are growing more popular –using style icon Paris Hilton’s 24-carat emerald cut diamond ring– as an example.

CNN provided 5-tips on buying a diamond ring. The news company told men to “involve her” with the diamond ring purchase; it labeled the “best” cut as the “ideal cut;” ( Definition, please?! )and CNN called the “5th C” the diamond’s certification and not to leave the store without it ( which grading lab, fellas? it makes a big, big difference ) CNN’s consumer tip on finding a lower price was to “go shy” on weight and keep with “near-colorless” as opposed to flawless ( you’re mixing up color and clarity) when buying a diamond ring.

This kind of generalized, superficial, and nebulous advice is more harmful than helpful to consumers. I don’t believe you would buy a home or a car this way, so why should the purchase of a diamond costing thousands of your hard-earned dollars be any different? The answer: it shouldn’t.

Do your homework and research. Get as much information as possible. An educated consumer is our Industry’s best customer and will give you the ability to make a purchasing decision that will max your dollars and provide you with Lifetime value and happiness!

Start Right Now!

A good place for you to begin is the Diamond Basics and Diamond Information sections of our DiamondVues Blog. Continue on to the sections on Jewelry and Diamond and Jewelry Appraisals. Then segue over to the Internet’s #1 Information Station, Diamondtalk where you will find accurate and timely information and discussions on all things diamonds and jewelry.

Happy Shopping!

Gold Shines Bright In Asia!

Reuters today reports that the fascination, importance and esteem of Gold among Asian peoples is on a much higher level than it is here in the United States or in Europe.

Villagers in Indonesia may wear one or two gold teeth to boost social status. In India, parents will not marry off their daughters without giving them some gold jewellery for financial security.

Ancient texts have talked about Indian merchants venturing on dangerous voyages to distant lands in search of gold. In China, gold inlay was applied to bronze objects by at least 1200 B.C.

Gold — the Glowing Dawn — has fascinated Asia for centuries and its demand is likely to only increase in the years ahead, led by China which is fast becoming the last gold-crazed nation in this region.

In Asia, the yellow metal is not only an item of adornment but also an investment — something that holders in quake-prone Japan can sell back for cash in times of trouble.

“In a longer term, you ask people whether they have confidence in the US dollar? Not really, right?” asked Albert Cheng, Far East managing director of the World Gold Council.

“Gold is a good financial vehicle where you can put your money in,” he told Reuters in Singapore.

Gold Shopper.jpg

Several Asian countries have seen an increase in demand for gold for jewelery and investment in recent years, reflecting economic growth and the metal’s growing popularity.

The world’s biggest buyer, India, it is estimated will consume 600 tons of gold this year, up from around 590 tonnes in 2004. India’s gold demand surged 17 percent in 2004 from a year earlier.

China, another main buyer whose consumption may eventually match India’s, is likely to see demand rising by 10 percent this year as the country liberalzes both its bullion market and diamond and jewelery markets to the West and Europe.

Dealers and analysts say investors have diversified into hard assets such as gold because of the significantly high U.S.A. trade deficit and China’s revaluation of the yuan — a move which will lead to stronger Asian currencies and a weaker dollar.

A weaker dollar means a more affordable price of gold, which is quoted in US dollars and currently stands at around $425 an ounce.

“In a country like India, we don’t have enough safe investment alternatives. People also have money in banks, but they want to create a portfolio and gold is an important part of the basket,” said Ranjeeth Rathore, a dealer in Madras.

“I have seen that when prices are low, people don’t listen to any investment advice. They say they want gold. That’s it.”

Indeed, gold prices have been volatile in recent months, touching a 3-month high of $443.60 in June, just a few dollars away from this year’s peak at $446.70, before profit-taking and a firming US currency erased some of the gains.

Gold hit a 16-1/2-year high of $456.75 in December.

But these choppy prices hav failed to dampen the demand in India, where jewelery forms an important part of Hindu marriages, with parents giving their daughter gold for financial security.

Hindus treat gold as an auspicious metal and like to buy and give it as a gift during religious festivals.

“The first choice of Indians is gold. It’s a sensible investment. They want to invest in something which is tangible,” said Rajesh Mehta, chairman of Rajesh Exports Ltd, India’s largest jewelery exporting firm.

“It is the best saving investment available anywhere in the world. Gold is the only commodity in which you can invest and can also use,” he said.

The situation is be bit different in Indonesia, where consumption could fall this year because of a firm gold price and record-high oil prices, which cause prices of basic essentials to rise. Indonesia, Southeast Asia’s largest gold buyer, consumed 88.9 tons of gold in 2004, up from 82.7 tons in 2003.

“Consumption may be below 80 tons. The gold price stays high at above $400 while buying power is depressed,” said Leo Hadi Loe, an independent analyst in Jakarta.

But Indonesia may be a one-off case. Neighbouring Vietnam saw consumption picking up 10 percent last year to 65 tons as locals sought hard assets for protection against volatile dong currency. Demand is likely to stay firm this year, say dealers.

Analysts are also upbeat on Asia.

“Strength in both China’s economy and currency and heightened investor interest should support Asian gold demand over the next year. And with rivers of energy dollars flowing into the Middle East, demand there shouldn’t be too shabby either,” Commonwealth Bank of Australia said in a report.

Shine On!

DeBeers: Profits Down, Closes Mines.

Two interesting announcements today by Debeers in another clear indication of their repositioning in the market from solely wholesale miners and rough sellers to a focused retail emporium.

First announcement is that they will be closing their South African Mines.

Gary Ralfe, managing director of De Beers, told Reuters on July 25 that the mines are exhausted of resources. The company’s Kimberley mines would close by year-end 2005. Their diamond mines in Kimberley, South Africa, were opened in 1871, and elimination will result in the loss of approximately 1,000 jobs.

Retreatment at Kimberley –a process of scouring waste deposits for leftover diamonds– would continue, according to Ralfe. The company’s Koffiefontein mine faces closure or sale in 2005, and its Oaks mine may close or be sold by year 2007.

De Beers’ Cullinan mine, Ralfe said, is still far from profitable; however, as a long-term resource it remains positive for kimberlite ore.

Second, DeBeers profits declined 21% compared to the first half of 2004. This was due to unfavorable exchange rates between the dollar and the South African Rand and the completion of stockpile selldown in 2004 which significantly added to the bottom line.

DeBeers is banking on emerging markets in China, Japan, and the Gulf to boost sales, increased sales to the U.S. of 5-6%, further prices increases (OUCH!), continued progress in the exploration and mining of diamond deposits in Canada, and the further development of their Supplier of Choice (SOC) Program which mandates that their site-holders be able not only to manufacture the rough diamonds but have the marketing skill and infrastructure and to sell these diamonds to you, the consumer. To this end, Debeers last month opened a retaiil store with LMVH on New York’s Fifth Avenue and is planning on opening at least another 20 retail “Salons” ( calling them ‘outlets’ is a NO-NO ) by mid 2006.

If you needed anything to show you how dramatically DeBeers is changing the way they do business you can find it in their most recent announcement of new siteholders for the upcoming 3-year cycle period. Stuller, the findings company is now a siteholder!

Times, they are a’changin!

Sri Lanka Follows Canada and India In Reducing Diamond Import Taxes.

Sri Lanka’s cabinet ended its 15 percent Value Added Tax (VAT) on imports and trading of rough, cut and polished gemstones, diamonds and precious metals, reported the official Daily News on July 24.

The Daily News quotes Rohitha Bogollogama, minister of advanced technology and national enterprise development,“We have taken a bold step forward in the right direction to make Sri Lanka the hub in the gem industry,” said . Additional incentives encouraging Sri Lanka’s mining sector will be added to the 2006 budget, she added.

Sri Lanka’s gem and jewelry industry is expected to surpass tea and apparel sector exports in the future.

The Sri Lanka Gem and Jewellery Association (SLGJA) said its in the process of introducing an internationally recognized quality certificate certifying the quality of gems purchased in Sri Lanka. Currently, certificates that are issued are not recognized internationally.

Future industry plans include setting up a Gem laboratory and gem trading floor in Ratnapura, Bogollagama told journalists at a press conference.

Sri Lanka’s gem and jewelry exports reached $101.23 million in 2004, a significant growth from 2003, said Ajith Perara, senior manager of the National Gem and Jewellery Authority (NGJA.) Gem and jewelry exports in the first half of 2005 stood at $44.80 million.

SLGJA has organized the 15th International Gem and Jewelry Exhibition 2005 (Facets) due to take place from August 31 to September 3. Facets organizing committee chairman, Macky Hashim said that Facets is the only national gem and jewelry show which is recognized internationally. 95 percent of the booths have already been sold out to many international participants.

Swiss Watch Exports Up, Up, Up!!

The Federation of the Swiss Watch Industry (FH) announced that the value of Swiss watches exported for the first six months of this year topped $4.34 billion, rising 11 percent over the same period last year and exceeding forecasts.

Finished watches constituted the bulk of that growth, FH reports. The value of finished Swiss watch exports reached $3.95 billion for the six-month period, growing 12.3 percent compared to the same period in 2004.

Gold watches represented nearly half that growth by value and comprised 20.3 percent of finished Swiss watch exports for the period. Bimetallic watches, which represented 20.9 percent of the period’s finished watch exports, and steel watches, which comprised 8.2 percent, were also credited with fueling finished Swiss watch exports’ growth in value for the first half of the year.

In terms of market share, the United States remained Switzerland’s largest importer of Swiss watch and clock products, taking $740.1 million in value for the six-month period, up 14 percent over last year. Hong Kong, Japan, Italy and France rounded out the top five markets for Swiss watch and clock exports for the first half of 2005.