Fears of another recession may be building, “but diamonds… are still a girl’s best friend”, says Rachel Cooper in The Daily Telegraph. They have been a safe haven of late. The price of rough diamonds has shot to new record highs after gaining almost 50% in the first half of the year. The prices of top-quality polished diamonds have also risen.
Having slashed output during the financial crisis, miners are now struggling to catch up with surging demand from Asia. China has become the second-largest buyer of diamonds after America. The two countries respectively scooped up 38% and 11% of world output last year. India represents 11% of global demand.
The market’s fundamentals look solid, reckons Charles Wyndham of WWW International Diamond Consultants. But prices have come too far too fast and are starting to correct. So Gem Diamonds (GEMD) – a relatively cheap potential play on the sector on a price/earnings ratio of 9.4 – could get even cheaper in the near future.