Lower Diamond Prices for The New Year

Due to the recent increase in the value of the Australian dollar and diamond prices going down in US dollars, we have lowered the price of a few diamonds.

Specifically these diamonds were reduced by between 5 and 10 percent:

Princess cut, 1.51ct, E/VS1
Round Brilliant, 1.03 G/SI1
Round Brilliant, 1.03 H/VS2
Round Brilliant, 1.03 E/SI1

Other diamonds I thought either the value was too low, or they were too difficult to replace – for example, our 1.3ct round brilliants.

As I explained to many clients when the dollar was in free-fall last year, our prices are based on the replacement cost of the diamond, not our cost.

For example, if a 1ct diamond cost us $4000 a month ago and now costs $5000, we have to factor that into the price, even though our actual cost price has not changed. This is due to the fact the our margin must cover:

• Diamond replacement.
• Overheads (wages, insurance etc).
• Profit to put back into company or to give back to shareholders.

The issue of replacement cost and whether diamond prices will fall is a much talked about topic in the industry. In the past few months I’ve heard wholesalers complain about retailers waiting for the “dollar to bounce back”, and hence not buying. Just this past week, we’ve heard industry pundit, Martin Rapaport explain that diamantaires should sell based on a diamond’s replacement cost – even if it means making an accounting loss on the sale.

For professional and profitable diamantaires, Rapaport is spot on. As long as you sell above the replacement cost of the diamond you are selling, and your business is sound, you will have no problems in this economic climate. This is because when prices go up, you can collect some extra cash on the sale. When prices go down, you can discount your stock and not pay as much tax or even get a tax credit on the loss, as taxes are counted in dollars – not carats.

Therefore, for those in the diamond industry, it doesn’t really matter when and at what price you buy your diamonds at, as a 1 carat diamond will always be worth the same amount as a 1 carat diamond of the same quality.

This entry was written by Nikhil Jogia and was posted on on Thursday, January 8th, 2009 at 2:50 pm and is filed under Taking Care of Business. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.