US Retail Offers Hope for Recovery
The third-quarter operations updates the mining companies and Hong Kong-based retail jewelers published highlighted the deep challenges facing the industry in 2024.
The negative numbers were hardly surprising, given the prevailing weak sentiment in the diamond trade.
The Hong Kong jewelers had previous noted the slow gem-set jewelry category, while sales of gold products surged when the metal’s prices rallied and have slumped since gold has peaked.
Most alarming was Luk Fook’s assertion that it was reducing its diamond offering and shifting toward fixed-price jewelry. While such a move by one company does not make a trend, it sets a dangerous precedent. It is another indication of the struggles the diamond trade has endured recently in greater China.
The production updates by the mining companies were equally unsurprising yet informative.
The major suppliers have borne the brunt of the slump, while junior and mid-tier miners generated revenue within last year’s range. De Beers and Botswana’s Okavango Diamond Company (ODC) canceled sales during the quarter to enable manufacturers to reduce their inflated polished inventory.
Consequently, De Beers added to the large inventory of rough it was already holding, and there are still a lot of goods in the midstream.
But all is not lost. There are rising expectations for the US holiday season, which began in November — even if many view Thanksgiving as the official starting point. Researchers have given optimistic outlooks for overall retail during the period. And there are encouraging signs for jewelry, with strong sales growth reported in October, including for diamonds, according to jewelry data providers.
Even an incremental improvement in diamond-jewelry sales at retail could jump-start the trading of polished and rough, helping reduce those inventory levels. The focus will be on retail over the next two months. After that, as the trade assesses its potential for 2025, there may be even more pressing questions to consider.
Read my full analysis published by Rapaport here.
Image: David Polak / Shutterstock, via Rapaport
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