We see some scary similarities between the diamond industry today and the market in the final years of the investment craze of the late 1970s.

Then, everybody was buying one-carat stones; that was the currency. You couldn’t get enough of them. Cutters were hoarding them and wouldn’t sell them unless you bought some of the unwanted mid-sizes in the 1.15-1.99 carat range and larger diamonds.

Now it’s the other way around. I spoke to a cutter today and he said, "I have a beautiful two-carat

F VS1. But I won’t sell it to you unless you buy caraters." On one hand this is good, as it shows the strength of the market. On the other, it shows an artificially created scarcity. This can backfire.

If De Beers is purposely holding back these sizes until the prices rise, they are encouraging speculation. The market is becoming over-heated in certain categories. People are already paying premiums on their sight boxes. It’s all starting to remind us a little too much of the late 1970s.

De Beers doesn’t have the same control over the market it did years ago, but it does have a lot of influence. They shouldn’t over-play their hand. Harry Oppenheimer once remarked, "De Beers makes mistakes — but not the same ones." Let’s hope so.v

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