ANTWERP DIAMOND BANK announced the winding down of its lending book in September, whilst ABN Amro has closed its Botswana office and lowered lending ratios from 100 to 70 per cent in the last 12 months. Photo: Antwerp Diamond Bank

ANTWERP DIAMOND BANK announced the winding down of its lending book in September, whilst ABN Amro has closed its Botswana office and lowered lending ratios from 100 to 70 per cent in the last 12 months. Photo: Antwerp Diamond Bank

Martin Rapaport: Bullish Christmas for Diamonds in U.S.

Issue 105, November 2014

Booming equity indices in the US are bullish for diamond prices, says diamond honcho Martin Rapaport, publisher of the "Rap List", used as the industry’s pricing benchmark.

“The key issue is wealth effect,” Rapaport says, speaking from New York. “American demand is very much built on the stock market. The typical diamond guy has money and is invested in the stock market and those people are getting a very strong signal that the value of their investments has gone up.”

“Easy money” has encouraged higher equity prices, spurring a strong Christmas season for diamond buying in the US, Rapaport predicts. “The Fed’s afraid to do anything to mess this market up. There have been some corrections here and there, so people get a little nervous, but everybody’s addicted to low rates, so I don’t see the Fed tightening.”

The Dow Jones hit an all-time high on Wednesday, 25 per cent above its peak in 2007. After 9 months of flat trade data, polished diamond imports into the US, the largest diamond market globally, meanwhile rose 29 per cent year-on-year to $2.1bn in September, with average prices rising 13 per cent to $1,874 per carat.

A third of all diamond sales in the US are concentrated in December, eclipsing Chinese Valentine’s Day as the year’s paramount buying season, according to figures released by De Beers this week.

Whilst low interest rates in the 1970s led to huge diamond stockpiles in Israel that were liquidated when rates rose, flooding the market and folding prices, Rapaport says there is no comparable build up now.

The supply side is more likely to put “a kibosh” on prices, he says. “De Beers is maintaining very high rough prices relative to polished so the banks are pulling out. On the one hand that’s very healthy, because it means people won’t be able to overbid rough."

"On the other hand, before you could get liquidity by playing with the banks; now you need to sell diamonds, so that’s why we’re seeing somewhat lower prices popping up here and there.”

“The key issue is wealth effect.”

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