The much-talked-about “readjustment” in skyrocketing diamond prices is not likely to happen this year, according to a new report from Bain & Co., sponsored by Antwerp World Diamond Centre.
Instead, it predicts the diamond market will continue on its current strong trajectory.
“The industry is in a much better financial position than it was during previous recessions,” it said. “And inventory levels of diamond jewelry and polished and rough diamonds are also among the lowest and healthiest the industry has seen in the past decade.”
The report notes that the U.S. diamond market was particularly strong in 2021, with diamond jewelry sales jumping 38% year-over-year and rising 23% relative to 2019. It said that the COVID-19 pandemic rapidly accelerated e-commerce efforts, even for independents, and some 90% of jewelry retailers now have online platforms.
The report singles out several factors for the strong results: economic relief (stimulus) packages, the low unemployment rate, the record-setting surge of the stock market, the growth in income from the nation’s highest earners, and the successful vaccine rollout.
Sales in China also rose, but not as much as in the United States. The world’s second largest market saw a 19% increase in diamond jewelry sales in 2021 and a 6% jump over pre-COVID 2019.
If sales in those markets decline, there could be a price “correction” by the end of the year—“similar to how the diamond market strongly rebounded and then readjusted to its historic trajectory during past recessions,” the report said.
But while that’s possible, it’s unlikely, the authors argue. They noted that both markets have seen a boost in consumer confidence, stemming from “successful vaccination programs, limited lockdowns, and resumption of interregional travel.”
While the end of government stimulus programs and consumer travel restrictions could hurt the diamond market, the report still predicts that the market will grow faster than it did pre-pandemic. However, by 2023 or 2024 things may return to normal.
Photo © Kendra Pariseault