Polished diamond prices continued to soften throughout September, after their swift ascent in June and July, according to IDEX Online Polished Diamond Index. The Index averaged 143.3 in September, declining 2.1 percent compared to August.

The full analysis of the polished diamond prices is available to IDEX Online Research subscribers and IDEX Online members here.

Prices declined for most diamond categories during the month. One-carat and five-carat rounds showed the greatest month-to-month price decline, 2.7 percent and 3.4 percent respectively, while three-carat rounds showed the least price weakness declining by only half a point on average.

Year-over-year, the scenario is very different. Overall prices increased by 21.3 percent compared to September 2010.

Toping the list of annual price increases are 0.5-carat rounds, up 35.6 percent in the past year, while 5-carat goods gained "only" 13.3 percent since September 2010.

Outlook: Polished Prices to Pause and Then Rise Again

The recent bearish market sentiment is signaling the end of the strong bull market experienced until late July. Seeking to maintain buyers' interest, prices may continue to soften in the short term.

After a short-term price softening, we expect prices of polished diamonds to continue to rise over the long term. Due to a shortage of new mining sources, and coupled with increasing demand from the BRIC markets, it appears that diamond prices – over the long term – may rise above their historic trends.