To show how psychologically driven the diamond market can be, here is an interesting bit from the GIA Insider, from GIA’s senior industry analyst (and former JCK-er) Russell Shor:
The De Beers Diamond Trading Company (DTC) raised prices on some categories of rough diamonds at the March 26–30 sight, which totaled about $650 million. According to executives familiar with the sight, low-to-medium qualities destined mainly for mass-market jewelry took the brunt of the average 3% to 5% increase.
Diamond manufacturers worldwide have been grappling with dwindling profits and rising debts, so a price increase would appear out of place. However, many of them had been anticipating that the DTC and other producers would trim rough sales to help relieve pressure on sightholders, so they began bidding up rough boxes to insure they had ample supplies. Typically, the DTC raises prices when box premiums spike, and this is what they did at the March sight.
So basically, the current soft demand is causing prices to increase. Who said markets were logical?