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Asia Precious October 1994
A Game Of Coloured Diamonds
By Alan Bronstein


The past six to 12 months have seen growing demand for natural fancy colour diamonds. They have been removed from the dealer market and absorbed by designers, investors, collectors and, most of all, the jewelry buying public.

In recent years, many fancy coloured traders have seen dwindling numbers of extraordinary stones cross their path. This could likely have been caused by so many more dealers playing the fancy coloured diamond game.

The greater involvement at manufacturer and wholesaler level coupled with growing interest on all continents and fuelled by thriving economies is causing scarcity of fancy colours. This is also causing pressure on prices which seem to be rising modestly.

The trend of the buying public has been toward better purities rather than imperfect stones. This trend should continue until the price discrepancy between clarities becomes too great. Then the lower quality eye clean stones and eye imperfect stones will close the gap. At the moment, it is hard to move eye imperfect fancy colours except for collector items which are extremely difficult to find.

The US market has seen an increase in demand in 1994. It is emerging from a soft market of the past few years and there appears to be some pent up demand. The momentum of the economy has stimulated some potential buyers to begin to purchase.

Make is becoming as increasingly important as quality. The 'buy anything with a certificate' mentality of the 80s has shifted to 'if I'm going to buy a coloured diamond, I'll pay a little more but I want it to sing' mentality of the 90s. This is a healthy change for the consumer as it forces cutters to focus on cutting better makes rather than saving weight. It is fitting that coloured diamonds be cut to their maximum beauty and not just maximum weight. Demand in the US should continue to grow as the holiday buying season approaches.

Overall demand for coloured diamonds runs the gamut of sizes and colours but often there is price resistance at consumer level. The expectation of obtaining a specific size, shape, purity and colour for the budget often ends in disappointment.

But the nicest stones do not stay on the market long as they get absorbed by either a risk taking investor or a romantic who falls in love with the stone (it has been known to happen).

Asia has become one of the most aggressive and fastest growing markets for fancy colours in the past few years. It is interesting to see that when Asian buyers come to the New York Diamond Dealers Club to purchase stones, coloured diamonds are on the list along with their specific white diamond needs.

The Asian impact is evident in Antwerp and Israel as the few stones that can be found often have minimum reserve prices set by strong Asian offers that were not accepted.

But the Pacific Rim is only at the beginning of its romance with coloured diamonds. Historically, Europe and the Middle East have been the major connoisseurs, collectors and consumers and continue to be important players in the game. The Gulf War temporarily slowed down Middle Eastern consumption and Europe with its economic problems also focused on other needs. Even with this slowdown for important stones the limited supply was easily absorbed by dealers willing to wait for the next upward cycle to begin.

As world economies start to gain momentum and knowledge of coloured diamonds grows, it becomes more obvious how rare certain coloured diamonds are. Pink and blue diamonds may be considered commercially available colours, but they have always been on the endangered species list because so few 'gems' exist in these colours. It is difficult to find nice stones above one carat. There are a handful of three carat plus stones on the world market at any time. If 50 stones appeared on the market tomorrow some might perceive the market flooded but they would be absorbed quickly.

Argyle with its seemingly vast resources of pinks, most of which are melees, cannot satisfy market needs. Even with the largest mine in the world yielding about 40 million carats a year. Argyle produces a limited supply of pinks and champagne browns above one carat. As the world's leading soruce for these colours, this would indicate that greater shortages are inevitable as market demand accelerates.

Argyle promotes its best pink diamonds at an annual, invitation only, tender sale. With the world's leading traders making their best bids, 50 to 75 rare stones can be removed from the market by one strong investor. This has happened at most of the sales since their inception in 1984. If Argyle has the goods, this year's tender could bring record prices.

As for the champagne brown diamonds, many designers have integrated them into beautiful fashion pieces as they seek new outlets for their individuality and creativity. Coupled with the advertising blitz by Argyle promoting champagne diamonds, consumers are slowly gaining confidence in this market segment.

Pink diamonds as well as blue diamonds from Africa and South America have been showing up less and less on the open market for years. These pinks tend to be less saturated than those from Argyle. The colour tends to be a purer pink whereas Argyle stones are predominantly modified by brown and purple. Pink diamonds from Africa and South America come in larger sizes and better purities than their Australian counterparts.

Occasionally a few old stones resurface on the open market but few new stones are being cut from rough. Many connoisseurs consider these pinks the cream of the crop.

Yellow is showing the greatest strength in demand in the US and Asia. The modified square brilliant cut (i.e., radiant, starburst) has become the favoured shape for yellow diamonds because it brings maximum colour to the aface of the stone and has wonderful brilliance. Traditional shapes like pear, oval, marquise, round and emerald cut have become more difficult to find.

There seem to be enough yellow diamonds to satisfy present demand. The super saturated yellows, canaries to some, continue on an unabated path of higher prices. It is conceivable they could eventually rival the values of the finest pinks and blues.

At times there are flurries of purple and orange diamonds that appear on the market. They could not be called commercially available because of their rarity and they are seldom sought as a fashion statement. They are mostly desired by collectors.

Natural colour red and green diamonds (traffic light colours) are the holy grail of the gem world. They are like UFO sightings; there is always talk of seeing one, but nobody can substantiate it. Few are lucky to gaze upon their rare beauty despite the dramatic increase in the number of dealers and cutters who have become involved in the hunt. This dispersion of the finite quantity of natural colour diamonds dilutes the availability even further.

A trader in coloured diamonds can never guarantee continuity of merchandise except for the most average yellows and browns. Even Argyle has been low on its famous pinks from time to time. In order to maintain an inventory, traders in coloured diamonds must constantly be ready to take a chance. They must learn to adapt to market conditions and be aggressive in order to maintain position. Those unwilling to take chances will be forced out of the coloured diamond game.

Coloured diamonds are the last bastion of illusion in the diamond world. The cycles of rising and falling values may come and go but natural coloured diamonds as rare and scarce commodities, seem here to stay.


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