Diamond Supply Outlook for 2023
The current landscape with regard to diamond supply is highly dynamic and responsive to global market events. We observe the following conditions that we anticipate will impact diamond supply in the coming months.
Supply will continue to tighten—but prices could still fall in the near term.
In previous economic cycles, it was possible to predict price and demand movements six months to a year in advance, but today’s highly uncertain economic climate makes it difficult to forecast more than a couple of months ahead. At present, supply is tightening slowly, and we expect this trend to accelerate based on our observations that manufacturers and cutters have pulled back on production activities in anticipation of a downturn that curbs demand for inventory.
While some retail jewelers, especially those that cater to affluent and high-net-worth customers, are continuing to enjoy robust demand, broader indications of an economic slowdown have prompted a pullback in mining and production activities. We predict a price decrease coming soon, with prices likely hitting a short-term bottom this year. A reduction of supply in the pipeline will help put a floor under diamond prices if manufacturing cutbacks get to a point where they begin to affect the availability of demand.
Economic conditions suggest a slowdown on the horizon.
A confluence of macroeconomic factors are acting as headwinds for economic growth. While the United States is still the largest market for diamonds worldwide, overall demand has not yet rebounded to pre-pandemic levels. Inflation continues to weigh on both business and household balance sheets as prices for goods and services remain elevated. Tighter credit conditions are eating into the profits of companies and making it more challenging for them to grow.
The takeaway for retail jewelers is that they should make sure they have tried-and-true basics on hand at all times so they don’t lose out to competitors. In a climate of less economic liquidity, jewelers would be wise to concentrate on ensuring availability of these basics—such as round stones, in particular—and not skimp on investing in those diamonds.