Certified polished diamond prices fell in July as trading continued to slow amid weak economic sentiment. Far East buyers have grown cautious and Indian suppliers are under pressure where liquidity remains tight. Buyers are avoiding large purchases while suppliers are adjusting to lower prices. Rough inventories are rising as polished trading volume declined and sightholders are refusing to buy high-priced De Beers rough diamonds.

In July, the RapNet Diamond Index (RAPI™) for 1 ct. certified diamonds fell 5.4 percent. ‎The RAPI for 0.3 ct. stones declined by 4.9 percent and the RAPI for 0.5 ct. ‎diamonds ‎dropped 5.3 percent. RAPI for 3 ct. diamonds fell 5.1 percent during the month. ‎

During the first seven months of 2012, RAPI for 1 ct. diamonds fell 8.8 percent with the steepest declines occurring since May. RAPI for 1 ct. diamonds is down 18.3 percent from one year ago.

According to the just released Rapaport Research Report, “Tough Opportunities,” diamond markets were quieter than usual in July. Demand in the United States remains stable, while Far East retailers have noted caution among Chinese consumers as economic growth has slowed. Polished dealer trading slackened ahead of the summer vacations in Belgium and Israel, and as India’s weak domestic market has curbed activity there. Depreciating currencies against the U.S. dollar, including the Indian rupee, euro and Israeli shekel, is raising operating expenses and adding uncertainty to diamond trading.

Rough markets are under pressure with prices softening. Trading of high-priced De Beers and ALROSA goods on the secondary market has slumped as sightholders are losing money.

Cautious trading is expected to continue through the remainder of 2012. Polished inventories are sufficient to see through the summer as buying remains custom-based for specific orders. Expectations are low for the Mumbai show in August and the Hong Kong September show.

“Lower prices are healthy and necessary for the diamond market as they allow trading to adjust to lower levels of demand. The diamond trade makes money by selling diamonds, not by holding them. Dealers must learn how to make profit when prices go down by selling and replacing inventory at lower prices. The value of inventory is its replacement cost,” said Martin Rapaport, Chairman of the Rapaport Group.