Saturday, August 27, 2011
Market Outlook: July
The polished market was relatively quiet as wholesalers in the U.S. took their traditional summer break and as retail inventories in the U.S. and the Far East were sufficiently large following the trade show season in May and June. As a result, buyers displayed some resistance to sellers’ high asking prices.
US Marshals To Sell Rare Yellow Diamond
Anyone interested in a 43 carat flawless yellow diamond may like to know that the United States Marshals Service (USMS) has one for sale. The rare stone, known as the Golden Eye, will be available through an online Bid 4 Assets auction from September 6, at 8 am to September 8, at 3 pm.
In 2006, Paul Monea arranged to sell an estate formerly owned by Mike Tyson and the Golden Eye for $19 million and a boat. This deal was actually an undercover FBI operation that earned Monea a 12 ½ year sentence for money laundering. The diamond, which at the time was owned by the Monea Family Trust, became of the property of the federal government and the USMS has been ordered to sell it.
The Golden Eye is actually 43.51 carats and has a cushion modified brilliant cut that is considered fair. It is internally flawless and has been deemed to be fancy intense yellow. The stone does not have any green or orange modifying color, according to a report from the Geological Institute of America.
This latter point is a significant one because even subtle overtones can make a big difference in the value of a yellow diamond, according to Nina Woolford, Master Gemologist Appraiser and Principle of C.M Woolford and Associates.
The minimum bid for the Golden Eye is $900,000 and placing that bid requires a refundable deposit of $180,000. Interested parties can view the stone but doing so requires paying the deposit. Bid 4 Assets would not disclose the number of appointments already scheduled, but at the time that this article is being published, slots are still available.
Due to federal rules, certain individuals are considered unqualified to bid, such as government employees, government contractors and sub-contractors or family members of these individuals. The USMS, therefore reserves the right to refuse transferring the diamond to a winner.
Lisa Black, USMS District Asset Forfeiture Coordinator, explains that the agency is mainly looking to prevent anyone related to the case from obtaining the diamond, whether that be family of the criminal or officers who worked on the case. The agency is adamant about avoiding conflict of interest or even the appearance of it.
To ensure that the best efforts are made in this regard, Black says before the winning bidder can claim the diamond, his name will be given to the US Attorney’s Office, which will then determine whether or not the transaction can be completed.
Investors should also be aware that there may be another reason for a rejected bid. The USMS is allowed to deny any bid for any reason, including money.
The agency, which expects national and international interest, has taken the position that it is the bidders’ responsibility to do their own research and then to decide how much they are willing to pay for the Golden Eye. Bid 4 Assets supports this idea, though they have made the grading report publicly available. What is not and will not be disclosed is the value of the stone.
However, Diamond Investing News has been informed that the USMS will reject the winning bid if the figure is too far below their determined value.
Diamond professionals strongly advise potential investors to bid with more than cash. Having the stone appraised and researching the market is imperative, they say.
There are no known stones like the Golden Eye. It is not even clear exactly where this diamond came from, but there are currently no indications that the stone is missing, stolen, subject to UN sanctions or Kimberley Process claims.
Unique and problem-free can be a very positive characteristics when considering diamond investments, but those factors alone should not be the basis for decisions.
An appraiser who stresses that she does not offer investment advice also stressed that if she were considering this stone for resale, she wouldn’t put any money into it until she knew who her potential buyers are and how much they are willing to pay.
Another thing…the bids in the auction will increase in $110,000 increments.
Diane Flora of the American Gem Society warns against relying on escalating bids to determine the stone’s value or resale potential. Since it is unknown who the bidders are or why they are trying to get the diamond, for all anyone knows a person with deep pockets who isn’t even interested in value or selling the diamond could drive its price way up, she says.
In 2006, Paul Monea arranged to sell an estate formerly owned by Mike Tyson and the Golden Eye for $19 million and a boat. This deal was actually an undercover FBI operation that earned Monea a 12 ½ year sentence for money laundering. The diamond, which at the time was owned by the Monea Family Trust, became of the property of the federal government and the USMS has been ordered to sell it.
The Golden Eye is actually 43.51 carats and has a cushion modified brilliant cut that is considered fair. It is internally flawless and has been deemed to be fancy intense yellow. The stone does not have any green or orange modifying color, according to a report from the Geological Institute of America.
This latter point is a significant one because even subtle overtones can make a big difference in the value of a yellow diamond, according to Nina Woolford, Master Gemologist Appraiser and Principle of C.M Woolford and Associates.
The minimum bid for the Golden Eye is $900,000 and placing that bid requires a refundable deposit of $180,000. Interested parties can view the stone but doing so requires paying the deposit. Bid 4 Assets would not disclose the number of appointments already scheduled, but at the time that this article is being published, slots are still available.
Due to federal rules, certain individuals are considered unqualified to bid, such as government employees, government contractors and sub-contractors or family members of these individuals. The USMS, therefore reserves the right to refuse transferring the diamond to a winner.
Lisa Black, USMS District Asset Forfeiture Coordinator, explains that the agency is mainly looking to prevent anyone related to the case from obtaining the diamond, whether that be family of the criminal or officers who worked on the case. The agency is adamant about avoiding conflict of interest or even the appearance of it.
To ensure that the best efforts are made in this regard, Black says before the winning bidder can claim the diamond, his name will be given to the US Attorney’s Office, which will then determine whether or not the transaction can be completed.
Investors should also be aware that there may be another reason for a rejected bid. The USMS is allowed to deny any bid for any reason, including money.
The agency, which expects national and international interest, has taken the position that it is the bidders’ responsibility to do their own research and then to decide how much they are willing to pay for the Golden Eye. Bid 4 Assets supports this idea, though they have made the grading report publicly available. What is not and will not be disclosed is the value of the stone.
However, Diamond Investing News has been informed that the USMS will reject the winning bid if the figure is too far below their determined value.
Diamond professionals strongly advise potential investors to bid with more than cash. Having the stone appraised and researching the market is imperative, they say.
There are no known stones like the Golden Eye. It is not even clear exactly where this diamond came from, but there are currently no indications that the stone is missing, stolen, subject to UN sanctions or Kimberley Process claims.
Unique and problem-free can be a very positive characteristics when considering diamond investments, but those factors alone should not be the basis for decisions.
An appraiser who stresses that she does not offer investment advice also stressed that if she were considering this stone for resale, she wouldn’t put any money into it until she knew who her potential buyers are and how much they are willing to pay.
Another thing…the bids in the auction will increase in $110,000 increments.
Diane Flora of the American Gem Society warns against relying on escalating bids to determine the stone’s value or resale potential. Since it is unknown who the bidders are or why they are trying to get the diamond, for all anyone knows a person with deep pockets who isn’t even interested in value or selling the diamond could drive its price way up, she says.
Colored Diamonds: Stones with Brilliant Profit Potential
Demand for colored diamonds is surging and prices are rapidly following the upward trend. According to Leibish Polnauer, President of Leibish & Co, a five carat yellow diamond is currently selling in the range of $75,000-$100,000, and notes that this is a 40 percent increase over last year’s prices. Gem Diamonds (LON:GEMD), whose Ellendale mine supplies Tiffany & Co. with yellow diamonds, announced that in the first quarter of 2011, it sold the jeweler these stones for an average of $3,379 per carat compared to $2, 545 per carat during the first quarter of 2010.
Interest in colored diamond prices and the profit potential of the stones is extending beyond producers and industry consumers to an expanding number of individual diamond investors. Leibish & Co maintains a special inventory of investment grade colored diamonds and confirms an increase of profit-focused clientele. Sean Dunn, Vice President of J.R. Dunn, reported a similar trend. Tight supply and growing demand, especially in emerging countries, are increasing prices throughout the diamond industry.
However, colored diamonds are much rarer than white stones, therefore a surge in interest is difficult to accommodate. High-end US consumers have come back to the market, said Dunn. “But demand in Asia is simply outstripping supply,” he adds. “Our inventory often sells faster to international clients. Some fly in willing to pay prices above retail. They take the diamonds overseas and sell them for even more.” Both India and Hong Kong are considered hot markets for colored diamond activity.
Before investing
Predictions for growth and longevity in the colored diamond market are highly optimistic. However, there are a number of things to consider before getting into this game. Foremost, is the forewarning that these investments are not for everyone.
Leibish says colored diamond investing is for people with liquidity and a long term view. According to Dunn, demand allows some people who bought diamonds in 2010 to sell them for decent returns now, something that hasn’t always been done. By his own account Polnauer says, Leibish sold an intense 4 carat yellow diamond about a year ago. The jeweler offered to buy it back at a 20 percent premium and the client refused. It’s all about the stone a person possesses, which is why Polnauer says an investor must study this market.
Dunn further stresses that investing in colored diamonds is a gamble. He also highlights the fact that some stones definitely offer a much higher probability of attractive returns, but, there is never a guarantee. “Generally, smaller stones (a carat or less) are harder to capitalize on. But there are exceptions.” Australian pinks are considered extremely rare and blues also tend to be placed in the rare and desirable categories. These stones may warrant investment at smaller sizes. Another thing, says Dunn, is that investors should avoid stones with undesirable characteristics.
Individuals who want to avoid venturing unguided into this market may want to consider the Novel Diamond Fund. The first of its kind, the newly launched fund specializes almost exclusively in the investment of colored stones. In an interview with Bloomberg, Alan Landau, CEO of Novel Asset Management, explained that the fund will focus on diamonds valued at $1 million or more. Investors will, therefore, be able to enjoy the historically high returns in this type of investment which have thus far been enjoyed mostly by those in the industry.
Instead of the buy and hold strategy common among funds of other types, Landau said this fund is going to exploit a spread created by buying at wholesale prices and selling at retail. Although open to new investors now, the fund is scheduled to close in October. Landau told Bloomberg he expects major institutions to catch on to the diamond investing trend and move into this market. Polnauer told Diamond Investing News, he expects colored diamonds to be like gold… experiencing drastic price increases over the span of a few years.
By Michelle Smith – Exclusive to Diamond Investing News
Interest in colored diamond prices and the profit potential of the stones is extending beyond producers and industry consumers to an expanding number of individual diamond investors. Leibish & Co maintains a special inventory of investment grade colored diamonds and confirms an increase of profit-focused clientele. Sean Dunn, Vice President of J.R. Dunn, reported a similar trend. Tight supply and growing demand, especially in emerging countries, are increasing prices throughout the diamond industry.
However, colored diamonds are much rarer than white stones, therefore a surge in interest is difficult to accommodate. High-end US consumers have come back to the market, said Dunn. “But demand in Asia is simply outstripping supply,” he adds. “Our inventory often sells faster to international clients. Some fly in willing to pay prices above retail. They take the diamonds overseas and sell them for even more.” Both India and Hong Kong are considered hot markets for colored diamond activity.
Before investing
Predictions for growth and longevity in the colored diamond market are highly optimistic. However, there are a number of things to consider before getting into this game. Foremost, is the forewarning that these investments are not for everyone.
Leibish says colored diamond investing is for people with liquidity and a long term view. According to Dunn, demand allows some people who bought diamonds in 2010 to sell them for decent returns now, something that hasn’t always been done. By his own account Polnauer says, Leibish sold an intense 4 carat yellow diamond about a year ago. The jeweler offered to buy it back at a 20 percent premium and the client refused. It’s all about the stone a person possesses, which is why Polnauer says an investor must study this market.
Dunn further stresses that investing in colored diamonds is a gamble. He also highlights the fact that some stones definitely offer a much higher probability of attractive returns, but, there is never a guarantee. “Generally, smaller stones (a carat or less) are harder to capitalize on. But there are exceptions.” Australian pinks are considered extremely rare and blues also tend to be placed in the rare and desirable categories. These stones may warrant investment at smaller sizes. Another thing, says Dunn, is that investors should avoid stones with undesirable characteristics.
Individuals who want to avoid venturing unguided into this market may want to consider the Novel Diamond Fund. The first of its kind, the newly launched fund specializes almost exclusively in the investment of colored stones. In an interview with Bloomberg, Alan Landau, CEO of Novel Asset Management, explained that the fund will focus on diamonds valued at $1 million or more. Investors will, therefore, be able to enjoy the historically high returns in this type of investment which have thus far been enjoyed mostly by those in the industry.
Instead of the buy and hold strategy common among funds of other types, Landau said this fund is going to exploit a spread created by buying at wholesale prices and selling at retail. Although open to new investors now, the fund is scheduled to close in October. Landau told Bloomberg he expects major institutions to catch on to the diamond investing trend and move into this market. Polnauer told Diamond Investing News, he expects colored diamonds to be like gold… experiencing drastic price increases over the span of a few years.
By Michelle Smith – Exclusive to Diamond Investing News
Tiffany & Co. 2Q Sales +31%, Profit +33% to $90M
Tiffany & Co. reported that second quarter revenue rose 30.5 percent year on year to $872.7 million, while cost of sales increased by 27 percent to $358 million, for the three months that ended on July 31, 2011. Same-store sales rose 22 percent. Net earnings jumped 32.5 percent to $90 million.
By region, Tiffany & Co. reported a 25 percent year on year increase in sales for the Americas at $438.2 million and comparable store sales rose 23 percent. Sales from the New York flagship store, specifically, increased 41 percent in large part due to strong foreign tourist demand.
In the Asia-Pacific, sales increased 55 percent to $173.2 million, while on a constant-exchange-rate basis, sales increased 45 percent. Tiffany & Co. reported growth in most countries with the largest increase in the greater China. In Japan, sales rose 21 percent to $142.5 million, but on a constant-exchange-rate basis, total sales increased 8 percent.
Tiffany & Co. sales across Europe increased 32 percent to $101.3 million. On a constant-exchange-rate basis, sales increased 17 percent.
Wholesale and ''other'' sales rose 46 percent to $17.4 million with stronger demand for finished products partly offsetting a decline in wholesale sales of rough diamonds.
Gross margin improved to 59 percent from 57.8 percent one year ago. Selling, general and administrative expenses rose substantially, as expected, due to nonrecurring costs of $34 million in the second quarter and $43 million in the first half, primarily due to the relocation of Tiffany's New York headquarters.
Tiffany & Co. held a 31.2 percent income tax rate in second quarter, which was lower than the 34 percent rate reported one year ago. The retailer contributed the decline primarily due to a reversal of a valuation allowance against certain deferred tax assets. Tiffany & Co. held $565.2 million in cash and cash equivalents on July 31, which was down from $614.7 million in 2010. However, Tiffany & Co. lowered its debt to 29 percent of stockholders' equity compared with 40 percent one year ago.
Tiffany & Co. has increased its inventory 18 percent year on year with nearly one-fourth of that increase resulted from the effect of translating stronger foreign currencies into U.S. dollars.
Michael J. Kowalski, the chairman of Tiffany & Co., said that such strong growth reflected the growing global appeal of Tiffany's product offerings. ''In addition, we have been able to absorb precious metal and gemstone cost increases while improving our gross and operating margins.
''Despite continuing economic uncertainty, our strong first half performance gives us ample reason to remain confident about our prospects for the balance of the year. We are encouraged that total worldwide sales growth in the third quarter-to-date is continuing to exceed our expectations due to noteworthy strength in the Americas, Asia-Pacific and Japan, demonstrating, once again, the attraction of the Tiffany & Co. brand. We are increasing our full year earnings forecast to $3.65 to $3.75 per diluted share, not including nonrecurring expenses, from the previous forecast of $3.45 to $3.55 per diluted share due to the better-than-expected second quarter results."
Shares in Tiffany & Co. (TIF) topped $83 only weeks ago, but then along with many other retailers, shares had fallen 33 percent by August 19. Still, at the market's close on August 25, shares had increased 50 percent year on year to $63.11.
By region, Tiffany & Co. reported a 25 percent year on year increase in sales for the Americas at $438.2 million and comparable store sales rose 23 percent. Sales from the New York flagship store, specifically, increased 41 percent in large part due to strong foreign tourist demand.
In the Asia-Pacific, sales increased 55 percent to $173.2 million, while on a constant-exchange-rate basis, sales increased 45 percent. Tiffany & Co. reported growth in most countries with the largest increase in the greater China. In Japan, sales rose 21 percent to $142.5 million, but on a constant-exchange-rate basis, total sales increased 8 percent.
Tiffany & Co. sales across Europe increased 32 percent to $101.3 million. On a constant-exchange-rate basis, sales increased 17 percent.
Wholesale and ''other'' sales rose 46 percent to $17.4 million with stronger demand for finished products partly offsetting a decline in wholesale sales of rough diamonds.
Gross margin improved to 59 percent from 57.8 percent one year ago. Selling, general and administrative expenses rose substantially, as expected, due to nonrecurring costs of $34 million in the second quarter and $43 million in the first half, primarily due to the relocation of Tiffany's New York headquarters.
Tiffany & Co. held a 31.2 percent income tax rate in second quarter, which was lower than the 34 percent rate reported one year ago. The retailer contributed the decline primarily due to a reversal of a valuation allowance against certain deferred tax assets. Tiffany & Co. held $565.2 million in cash and cash equivalents on July 31, which was down from $614.7 million in 2010. However, Tiffany & Co. lowered its debt to 29 percent of stockholders' equity compared with 40 percent one year ago.
Tiffany & Co. has increased its inventory 18 percent year on year with nearly one-fourth of that increase resulted from the effect of translating stronger foreign currencies into U.S. dollars.
Michael J. Kowalski, the chairman of Tiffany & Co., said that such strong growth reflected the growing global appeal of Tiffany's product offerings. ''In addition, we have been able to absorb precious metal and gemstone cost increases while improving our gross and operating margins.
''Despite continuing economic uncertainty, our strong first half performance gives us ample reason to remain confident about our prospects for the balance of the year. We are encouraged that total worldwide sales growth in the third quarter-to-date is continuing to exceed our expectations due to noteworthy strength in the Americas, Asia-Pacific and Japan, demonstrating, once again, the attraction of the Tiffany & Co. brand. We are increasing our full year earnings forecast to $3.65 to $3.75 per diluted share, not including nonrecurring expenses, from the previous forecast of $3.45 to $3.55 per diluted share due to the better-than-expected second quarter results."
Shares in Tiffany & Co. (TIF) topped $83 only weeks ago, but then along with many other retailers, shares had fallen 33 percent by August 19. Still, at the market's close on August 25, shares had increased 50 percent year on year to $63.11.
Tiffany Ranked Top Jewelry Brand in Terms of Digital IQ
Tiffany & Co is the top-ranked jewelry brand in terms of "digital IQ," according to a specialty retail study released this week by the L2 think tank.
While both the Watch and Jewelry and Accessories categories have show improvement since brands began investing in social media, these areas continue to be among the worst performers overall in digital media, the study said.
Tiffany, however, was rated "Gifted." L2 praised the veteran diamond company's "jewel of a mobile app" and "smart digital cross promotion."
Online diamond retailer Blue Nile, the next-highest-rated jewelry firm, garnered a grade of "Average," with L2 criticizing its site as "dated."
L2 praised the look of Cartier's site but criticized its mechanics, giving the jeweler an Average grade. Swarovski and Swatch also came in for Average ratings, while Zales earned a rating of Challenged. L2 observed that the jeweler would benefit from enhancing its mobile and YouTube offerings.
According to L2's report, over 97% of consumers say that social media has some effect on their purchasing decisions; 79% of smartphone owners use their devices while shopping; and 70% of consumers check product reviews before making a purchase.
While both the Watch and Jewelry and Accessories categories have show improvement since brands began investing in social media, these areas continue to be among the worst performers overall in digital media, the study said.
Tiffany, however, was rated "Gifted." L2 praised the veteran diamond company's "jewel of a mobile app" and "smart digital cross promotion."
Online diamond retailer Blue Nile, the next-highest-rated jewelry firm, garnered a grade of "Average," with L2 criticizing its site as "dated."
L2 praised the look of Cartier's site but criticized its mechanics, giving the jeweler an Average grade. Swarovski and Swatch also came in for Average ratings, while Zales earned a rating of Challenged. L2 observed that the jeweler would benefit from enhancing its mobile and YouTube offerings.
According to L2's report, over 97% of consumers say that social media has some effect on their purchasing decisions; 79% of smartphone owners use their devices while shopping; and 70% of consumers check product reviews before making a purchase.
Tuesday, August 23, 2011
Colored Diamonds: Stones with Brilliant Profit Potential
Demand for colored diamonds is surging and prices are rapidly following the upward trend. According to Leibish Polnauer, President of Leibish & Co, a five carat yellow diamond is currently selling in the range of $75,000-$100,000, and notes that this is a 40 percent increase over last year’s prices. Gem Diamonds (LON:GEMD), whose Ellendale mine supplies Tiffany & Co. with yellow diamonds, announced that in the first quarter of 2011, it sold the jeweler these stones for an average of $3,379 per carat compared to $2, 545 per carat during the first quarter of 2010.
Interest in colored diamond prices and the profit potential of the stones is extending beyond producers and industry consumers to an expanding number of individual diamond investors. Leibish & Co maintains a special inventory of investment grade colored diamonds and confirms an increase of profit-focused clientele. Sean Dunn, Vice President of J.R. Dunn, reported a similar trend. Tight supply and growing demand, especially in emerging countries, are increasing prices throughout the diamond industry.
However, colored diamonds are much rarer than white stones, therefore a surge in interest is difficult to accommodate. High-end US consumers have come back to the market, said Dunn. “But demand in Asia is simply outstripping supply,” he adds. “Our inventory often sells faster to international clients. Some fly in willing to pay prices above retail. They take the diamonds overseas and sell them for even more.” Both India and Hong Kong are considered hot markets for colored diamond activity.
Before investing
Predictions for growth and longevity in the colored diamond market are highly optimistic. However, there are a number of things to consider before getting into this game. Foremost, is the forewarning that these investments are not for everyone.
Leibish says colored diamond investing is for people with liquidity and a long term view. According to Dunn, demand allows some people who bought diamonds in 2010 to sell them for decent returns now, something that hasn’t always been done. By his own account Polnauer says, Leibish sold an intense 4 carat yellow diamond about a year ago. The jeweler offered to buy it back at a 20 percent premium and the client refused. It’s all about the stone a person possesses, which is why Polnauer says an investor must study this market.
Dunn further stresses that investing in colored diamonds is a gamble. He also highlights the fact that some stones definitely offer a much higher probability of attractive returns, but, there is never a guarantee. “Generally, smaller stones (a carat or less) are harder to capitalize on. But there are exceptions.” Australian pinks are considered extremely rare and blues also tend to be placed in the rare and desirable categories. These stones may warrant investment at smaller sizes. Another thing, says Dunn, is that investors should avoid stones with undesirable characteristics.
Individuals who want to avoid venturing unguided into this market may want to consider the Novel Diamond Fund. The first of its kind, the newly launched fund specializes almost exclusively in the investment of colored stones. In an interview with Bloomberg, Alan Landau, CEO of Novel Asset Management, explained that the fund will focus on diamonds valued at $1 million or more. Investors will, therefore, be able to enjoy the historically high returns in this type of investment which have thus far been enjoyed mostly by those in the industry.
Instead of the buy and hold strategy common among funds of other types, Landau said this fund is going to exploit a spread created by buying at wholesale prices and selling at retail. Although open to new investors now, the fund is scheduled to close in October. Landau told Bloomberg he expects major institutions to catch on to the diamond investing trend and move into this market. Polnauer told Diamond Investing News, he expects colored diamonds to be like gold… experiencing drastic price increases over the span of a few years.
By Michelle Smith
Interest in colored diamond prices and the profit potential of the stones is extending beyond producers and industry consumers to an expanding number of individual diamond investors. Leibish & Co maintains a special inventory of investment grade colored diamonds and confirms an increase of profit-focused clientele. Sean Dunn, Vice President of J.R. Dunn, reported a similar trend. Tight supply and growing demand, especially in emerging countries, are increasing prices throughout the diamond industry.
However, colored diamonds are much rarer than white stones, therefore a surge in interest is difficult to accommodate. High-end US consumers have come back to the market, said Dunn. “But demand in Asia is simply outstripping supply,” he adds. “Our inventory often sells faster to international clients. Some fly in willing to pay prices above retail. They take the diamonds overseas and sell them for even more.” Both India and Hong Kong are considered hot markets for colored diamond activity.
Before investing
Predictions for growth and longevity in the colored diamond market are highly optimistic. However, there are a number of things to consider before getting into this game. Foremost, is the forewarning that these investments are not for everyone.
Leibish says colored diamond investing is for people with liquidity and a long term view. According to Dunn, demand allows some people who bought diamonds in 2010 to sell them for decent returns now, something that hasn’t always been done. By his own account Polnauer says, Leibish sold an intense 4 carat yellow diamond about a year ago. The jeweler offered to buy it back at a 20 percent premium and the client refused. It’s all about the stone a person possesses, which is why Polnauer says an investor must study this market.
Dunn further stresses that investing in colored diamonds is a gamble. He also highlights the fact that some stones definitely offer a much higher probability of attractive returns, but, there is never a guarantee. “Generally, smaller stones (a carat or less) are harder to capitalize on. But there are exceptions.” Australian pinks are considered extremely rare and blues also tend to be placed in the rare and desirable categories. These stones may warrant investment at smaller sizes. Another thing, says Dunn, is that investors should avoid stones with undesirable characteristics.
Individuals who want to avoid venturing unguided into this market may want to consider the Novel Diamond Fund. The first of its kind, the newly launched fund specializes almost exclusively in the investment of colored stones. In an interview with Bloomberg, Alan Landau, CEO of Novel Asset Management, explained that the fund will focus on diamonds valued at $1 million or more. Investors will, therefore, be able to enjoy the historically high returns in this type of investment which have thus far been enjoyed mostly by those in the industry.
Instead of the buy and hold strategy common among funds of other types, Landau said this fund is going to exploit a spread created by buying at wholesale prices and selling at retail. Although open to new investors now, the fund is scheduled to close in October. Landau told Bloomberg he expects major institutions to catch on to the diamond investing trend and move into this market. Polnauer told Diamond Investing News, he expects colored diamonds to be like gold… experiencing drastic price increases over the span of a few years.
By Michelle Smith
Global Market Update
Markets turning cautious as rough prices soften in response to tighter credit and uncertain economic conditions. De Beers rough selling at low premiums, and even discounts, ahead of next week’s DTC sight. Arjav rough auction sells 45% by lot. Polished prices soften. Buyers expecting lower prices but may be disappointed as Far East consumers expected to continue buying diamonds in spite of U.S. slowdown. Hong Kong’s 2Q polished imports +37% to $4.5B, polished exports +44% to $3.3B. Gitanjali Gems FY1Q revenues +39% to $573M, profits +57% to $27M. Sarin Technologies 2Q revenues +9% to $16M, profits +8% to $5M. Diamond industry broker Gerald Rothschild dies age 86.
Global Markets
United States: Sluggish economic data and political debate continue to affect confidence as retailers express concern that consumer spending may tighten in the coming months. Wholesalers report that demand has softened in the past few weeks but attribute the quieter market to the seasonal effects of the summer period. They note good demand for bread-and-butter 0.50-carat to 1.25-carat, VS-SI stones, which may be driven by shortages of supply, but demand for larger sizes remains weak.
Belgium: Activity remains quiet as most traders are on vacation until the bourse reopens on Monday, August 22. Dealers who have traveled abroad to buy goods have reported caution in the market, particularly from Mumbai. As a result, dealers remain uncertain how the market will develop when the bourse resumes official operations.
Israel: Trading is still slow as the bourse remains closed for the three-week summer break. Activity is expected to quickly return to normal next week as businesses reopen and begin their preparations for the September Hong Kong show. There is a sense of relief among dealers that the market volatility occurred during the vacation period. Traders appear confident that polished prices will remain stable in the coming month, and believe that the recent declines were a temporary correction.
India: Polished trading has slowed significantly with tightened liquidity and heightened uncertainty. Prices have softened in the past week. Trading was also impacted by the shorter work-week due to a local festival on Saturday and the Independence Day public holiday on August 15. Polished buyers have grown cautious and have opted to wait and see if prices will continue to drop before committing to a purchase. There remains good demand and trading of star and melee goods, 0.02-carat to 0.18-carat stones. The rough market remains quiet as dealers are hesitant to sell-off their inventories while prices are declining. Premiums on DTC boxes are low ahead of next week’s sight and activity on the secondary market is slow.
China: Wholesale trading remains quiet as buyers remain cautious about high prices. Retailers have held back on making large inventory purchases as they expect prices to soften. While August is generally a slow retail period, trading activity is expected to increase in the coming weeks as retailers start preparations for the National Day Golden Week holiday retail season, which starts on October 1.
Hong Kong: Diamond trading is steady but quiet over the summer period. Buyers appear cautious about the market and the impact that the weak economic outlook will have on diamond prices. Still, business activity is taking place, mainly to fill specific orders as buyers continue to avoid large inventory purchases through the summer and in the current price environment.
Global Markets
United States: Sluggish economic data and political debate continue to affect confidence as retailers express concern that consumer spending may tighten in the coming months. Wholesalers report that demand has softened in the past few weeks but attribute the quieter market to the seasonal effects of the summer period. They note good demand for bread-and-butter 0.50-carat to 1.25-carat, VS-SI stones, which may be driven by shortages of supply, but demand for larger sizes remains weak.
Belgium: Activity remains quiet as most traders are on vacation until the bourse reopens on Monday, August 22. Dealers who have traveled abroad to buy goods have reported caution in the market, particularly from Mumbai. As a result, dealers remain uncertain how the market will develop when the bourse resumes official operations.
Israel: Trading is still slow as the bourse remains closed for the three-week summer break. Activity is expected to quickly return to normal next week as businesses reopen and begin their preparations for the September Hong Kong show. There is a sense of relief among dealers that the market volatility occurred during the vacation period. Traders appear confident that polished prices will remain stable in the coming month, and believe that the recent declines were a temporary correction.
India: Polished trading has slowed significantly with tightened liquidity and heightened uncertainty. Prices have softened in the past week. Trading was also impacted by the shorter work-week due to a local festival on Saturday and the Independence Day public holiday on August 15. Polished buyers have grown cautious and have opted to wait and see if prices will continue to drop before committing to a purchase. There remains good demand and trading of star and melee goods, 0.02-carat to 0.18-carat stones. The rough market remains quiet as dealers are hesitant to sell-off their inventories while prices are declining. Premiums on DTC boxes are low ahead of next week’s sight and activity on the secondary market is slow.
China: Wholesale trading remains quiet as buyers remain cautious about high prices. Retailers have held back on making large inventory purchases as they expect prices to soften. While August is generally a slow retail period, trading activity is expected to increase in the coming weeks as retailers start preparations for the National Day Golden Week holiday retail season, which starts on October 1.
Hong Kong: Diamond trading is steady but quiet over the summer period. Buyers appear cautious about the market and the impact that the weak economic outlook will have on diamond prices. Still, business activity is taking place, mainly to fill specific orders as buyers continue to avoid large inventory purchases through the summer and in the current price environment.
India's Diamond Jewelry Manufacturers Looking to Cut Gold Content as Prices Climb
The ever-increasing price of gold (the precious metal hit a record high on August 11, 2011) is prompting Indian jewelry manufacturers to seek ways of reducing the amount of gold used in diamond jewelry while retaining the jewels' look, feel, and value, the Business Standard reports.
While gold should comprise some 35% of a piece of jewelry's weight, some manufacturers have reduced gold use in their jewelry to as low as 12%.
The Standard quoted Vijay Jain of the Orra diamond jewelry company, who explained that the use of certain machines in manufacturing diamond-studded gold jewelry could reduce gold content by 10-15%. Jain also said that the machine-made jewelry was more durable and featured a better finish.
While gold should comprise some 35% of a piece of jewelry's weight, some manufacturers have reduced gold use in their jewelry to as low as 12%.
The Standard quoted Vijay Jain of the Orra diamond jewelry company, who explained that the use of certain machines in manufacturing diamond-studded gold jewelry could reduce gold content by 10-15%. Jain also said that the machine-made jewelry was more durable and featured a better finish.
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