Friday, June 15, 2012

Worldwide diamond glut:


Some large and famous diamonds


According to the Times of London the economic downturn has created a worldwide glut of diamonds that is caused the closing of several diamond mines.  It is also caused a precipitous drop in their price.  If you already own a high-priced diamond like all diamonds its value has tanked.  The best buys for diamonds can be found right now in your local hock shop.  This is because right now so many people have pawned their diamonds to raise cash in uncertain times that there are now too many diamonds on the market.

This is simple economics where the supply of diamonds exceeds the demand for diamonds.  The law of supply and demand whenever dictates when this happens it drives the prices down, consequently the price of diamonds is apt to remain depressed for the next several years.

This is not only true of diamonds but probably also applies to the other gemstones particularly the precious ones like rubies, sapphire's and emeralds.  Just like diamonds the demand for these stones has also fallen.  The law of supply and demand applies to these stones too.

It may be true that diamonds are forever, but right now they're not a girl’s best friend and the buyers are more than fickle.  This crashing of the diamond market has already caused many jewelers to go out of business and shutter their doors.  Even Tiffany's in New York one of the greatest jewelers in the world is even struggling to sell their supply of diamonds.

By the end of 2008 diamond sales in the United States declined by 20%, and the United States accounts for 50% of the worldwide diamond sales.  Another factor that has caused this decline in prices is the fact that Debeers who for many years had a stranglehold on diamond sales no longer controls a large portion of the world's diamond supply as it has done in prior years.  For many years DeBeers was able to maintain the high-priced diamonds by choking off the supply end of the business.

Because the economic downturn has spread to China and India it has chocked off the demand there also.  It had been hoped by the diamond miners that the increasing wealth in these countries would of taken off the slack in the diamond market.  This worldwide economic glut has caused the price of diamonds to fall by as much as 30% from its peak in August of 2008.

As recently as September of 2008 Debeers reported that they were unable to get diamonds out of the ground fast enough to meet the demand.  This all came to an end with the stock market crash in October, 2008 and the continuing decline of the stock market since.  DeBeers has stated that is going to decrease diamond production by 50% through April 2009.

Although troubles loomed ahead for several previous years the diamond producers took a short-term view and proceeded to mine more diamonds that there was a demand for.  The natural consequence of this action was that they had many more diamonds stockpiled them they needed.

The quest for diamonds is still ongoing throughout the world including in our neighbor Canada that is now the sixth-largest producer of diamonds in the world.  Alrosa the Russian diamond mining company has already announced that it is not going to cut back production for the foreseeable future.

References:


RT Business, Alrosa to continue producing sparkle despite diamond glut, http://www.russiatoday.com/Business/2009-02-06/Alrosa_to_continue_producing_sparkle_despite_diamond_glut.html  

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