There is much worry about the United States economy is even a world enterprise such as that of diamonds. The diamond industry is in fact one that encompasses a worldwide client base, as the diamonds that are in any region may be available for sale to those anywhere. Should a recession hit the United States, some experts believe, diamond sales could in fact fall somewhat. There are several potential problems here and it seems there might be one area of the world could help the diamond trade even if the United States falls into a recession.
Why Recession Will Hurt
Diamond companies, dealers and manufactures continuously monitor the going price of diamonds, as does any investor in the industry. As one of the most lucrative of natural resources, diamonds will be a solid value even if a recession where to happen. However, why would they feel any affects at all?
In one meeting held by some of the larger companies in the industry, the topic of a global slowdown came into the discussion. The problems of the global economy have been significant in the last year. With the United States and its hurting housing market came the downfall of some of the world’s largest banks and lenders. As that happened, more risk was taken on by some of the other companies to help offset the problem. In addition, lenders got worried and to help protect themselves, many of them reigned in their lending. Now, lending is much more strictly under monitoring and lenders are continuously cautious about whom they lend to and how much they lend.
This affects the diamond market, of course. With the global credit crunch in place, there will be less money in the hands of buyers, dealers as well as the public. This could mean that sales of diamonds will drop. Yet, the credit crunch will also be a factor because more people are concerned amount investments that seem frivolous or those that are not necessary (they will pay for their mortgage rather than buying precious diamonds, for example.) With that said, it is likely that the industry will see somewhat of a slowdown. At the conference of these experts, they looked at what was likely to happen.
Sales for the last year were up from previous years, which is a good sign for any organization. Many of the larger diamond companies saw sales rise by significant amounts, any place from 10 percent up to nearly 55 percent. It is likely that sales numbers will continue to grow into the future, these experts believe.
You may be wondering how diamond sales could be growing if in fact the United States, Europe and Australia will likely fall into a recession and therefore have less buying power in the diamond industry. With the credit crunch and the risks of inflation, there is very real reason to believe that the diamond industry, in these areas at least, will slip some. Yet, the trade will be offset by a significant increase in the demand for diamonds in other areas.
Specifically, the Arab markets will continue to grow the diamond sales and the overall rise in diamond prices. One particular market that seems to continue to grow is that of the Dubai market. There, some companies have seen a significant rise in the sales sometimes even to doubling sales. Because there is a soaring disposable income (due in part to the rise in crude oil prices) in the hands of many of these countries, diamonds may be the way in which they invest. Experts believe that the flamboyant tastes of these people will help to drive sales higher.
According to the Dubai Chamber of Commerce and Industry, the retail diamond jewelry sales in the Gulf of Cooperation of Arab states have a diamond industry value of some $2 billion. These numbers are likely to increase substantially over the next years. In the first quarter of 2008, diamond revenues grew by over 32 percent to $1.5 billion in Dubai, and there is no end in sight. The country imported $2 billion worth of diamonds in 2007, mostly coming from South Africa, Angola and Russia.
Then there is Saudi Arabia. This country is the largest exporter of crude oil, of course. It is also one of the largest diamond investors. About 75 percent of all diamond and jewelry purchases made by the Gulf Arab states come from Saudi Arabia.
Therefore, the question is this, then. Will the drop in United States, European and other western country’s investments in diamonds hurt the diamond industry? While many believe that sales will continue to be strong, most of the diamond companies are relying on the fact that the Arab community will hold them strong into any recession that may show.
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