The annual Basel watch and jewellery fair indicated that there is healthy trading activity in the dealer market. Although some traders said buying in larger stones has cooled a bit after the recent sharp price increases, others maintained buying in better end cleanish goods was still very bullish. The trade also reported strong orders from the watch industry for smaller Fine diamonds. The exceptional growth in the number of watch brands seen at Basel was evidence of this and traders are expecting severe supply shortages in Fine goods where the biggest price increases are seen. Sales at Basel were reportedly higher than last year in most categories barring the American type Commercial goods. But despite active inter dealer activity and strong demand in the watch industry there is an underlying caution. The strong order flow in the watch industry is said to be partly driven by limited production capacity – hence watchmakers are placing more orders than they necessarily need to ensure they receive at least a proportion of what they require. The weak dollar is also seen as a driving factor for traders seeing a good buying opportunity, rather than actual demand at retail. Polished trading activity will slow in the wholesale market in coming weeks due to the Jewish holidays and with persistent reports about the slumping US economy and tightening credit worldwide there may be more uncertainty. Expectations for the next big trade event in Las Vegas next month are not high. However, Basel gave a positive signal to a cautious market that nevertheless remains concerned about the impact of weakened US retail demand. Meanwhile the main PolishedPrices index ended higher on Friday at 131.3 points, after opening at 129.7 points on Monday. At Monday’s opening, the only benchmark category in positive territory were Fine 0.3 carat diamonds which gained 6.7%.

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