What the Recession Will Mean For the Diamond and Jewelry Industry - March.2008

It is almost certain: We are in a recession. There have already been several bankruptcies, the chain stores are doing poorly and last year there were reports of a so-so Christmas. Still the high end remains strong, proving that, even in the worst of times, the rich still have money.

The situation today is different than the worst recession the industry faced, in the early 80s. At that time, interest rates were almost 20%, which broke the back of many a dealer and jeweler. Now interest rates are low, so even with a slowdown, most people can keep their liquidity, as long as the banks don't press too hard.

In the late seventies, there was a tremendous "bren" (fire) in the very fine stones — from D Flawless to VVS. By the end of the recession, those stones lost 70% of their value.

But now prices have not been increasing too fast, and largely reflect supply, demand and the market. This is true for all sectors of the market except for the very large stones — which seem, so far, to be immune to the recession (as seen by the recent sales by the auction houses.)  v