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DIAMOND MARKET OVERVIEW

While uncertainty about the effect of the problems in the US retail market and the wider US economy continues to grip the diamond market, fundamentals for polished continue to point at an upward trend. However, traders are expecting price volatility to increase. On the one hand the perception of shortages in rough has triggered an element of speculative trading that is driving demand. On the other hand the poor margins in manufacturing and the problems in the US retail market have led to liquidations and reluctance in the supply chain to hold stock. Traders in Europe and Israel are feeling liquidity tightening and banks are said to be more stringent in their lending. With the lack of positive news or a big event to boost polished and reports this week of another bankruptcy in the US retail market, some market players are convinced a correction in rough prices is inevitable. In the broader market, the overall PolishedPrices index ended the week slightly higher at 132.2.points after starting the week at 130.7 points. At the opening on Monday, Fine quality one carats showed a strong performance, gaining 6.6% on the week. But Fine 0.5 and 0.3 carats were sharply down, opening 5.4% and 8.6% lower respectively. Commercial one carat diamonds were almost unchanged, up 0.3%, while Commercial 0.5 and 0.3 carats fell 3.4% and 3.1% respectively.

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