After sliding for much of 2011 and 2012, diamond prices seem to be bottoming out. The widely watched Polished Prices Index has edged up over the past three months and last month briefly touched a nine-month high. The demand and supply outlook, moreover, is encouraging.
In the 1990s, there was still a big stockpile at De Beers, the world’s top diamond group. There have not been any major discoveries of diamond fields for 20 years, and the major mines have only around 20 years’ worth of diamonds left to extract, says Garry White in The Daily Telegraph.
As for demand, the key US market is gradually strengthening and Asian consumers’ buying power is rising rapidly as more and more people join the middle classes. In China and India, the number of households with a disposable income of $15,000 is set to rise to about 469 million from 220 million today, notes Tom Bulford in our free small-cap investment email The Penny Sleuth.
Given the encouraging long-term picture for the industry, investors should consider tucking away a diamond stock. White highlights UK-listed Petra Diamonds (PDL). It has just discovered a 25.5 carat blue diamond, owns stakes in eight producing mines, and “is in the middle of a significant expansion plan”.