In an effort to keep diamond prices stable while facing a significant decline in demand, the entire diamond industry has shifted from full speed ahead to reverse in terms of production.
The first half of 2008 saw polished diamond prices go up 15% compared the previous year. Diamond mines were implementing expansion plans and there was full employment for cutters, wholesalers, and retailers worldwide.
Starting in July, diamonds started to see the same pressures that commodities like oil were experiencing. Consumer fear, triggered by reduced real estate equity and tightened credit, resulted in reduced luxury purchases and lower demand for diamonds. The inertia of the diamond industry pipeline caused an out of balance between supply and demand with the result being a 11% drop in polished diamond prices during the second half of 2008.
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