Diamonds Are A Dealer's Best Friend

They stored diamonds in milk cans in South Africa during the Depression --who could afford them? But now more than 40 million American women wear diamonds, and last year Americans bought about $400 million worth of the precious stones. Last week, at their biennial convention in Manhattan, members of the World Federation of Diamond Exchanges predicted that U.S. diamond sales would rise at least another 10% this year, and they looked forward to continued scarcity. Says Amsterdam's Louis Asscher, former chairman of the International Diamond Manufacturers Association: "There won't be any queuing up at Tiffany's or Cartier's, but good diamonds will be harder to find than ever."

Gems by Mail. Demand for diamonds has overrun the supply in the last few years, largely because producers do not want to exhaust their uncertain sources at the mines, and dealers like to keep the prices in the way-up-there brackets. Last week South Africa's De Beers Consolidated Mines--which markets 80% of the world's diamonds and sells only when, where, and to whom it deigns--announced that stocks were little more than half as high as a year ago. There have been two wholesale-price increases, totaling 15%, in the past 15 months. Jewelers' retail markups have remained at a princely 100%. On Manhattan's Fifth Avenue, a one-carat ring of high quality now retails for $1,600 to $1,700, up from $1,000 five years ago. Leading diamond dealers, not unmindful that talk of higher future prices will induce some would-be purchasers to buy sooner rather than later, estimate that in ten years a one-carat stone will bring between $3,000 and $3,500.

One reason for the spiral is that increasingly affluent Americans, who accounted for more than half of last year's sales, are calling for more and more diamonds. Four-fifths of the U.S. purchases are for engagement rings, the most popular type being stones of about one-half carat that retail for about $250. Styles are shifting: the pear shape and emerald cut are fading in popularity, but sales of the marquise and brilliant cut are sparkling. New York is the richest market (20% to 25% of all U.S. sales), followed by Chicago, Texas and Southern California. Surprisingly, many Americans order their diamonds through the mail. Says a partner in one Manhattan firm that caters to customers who buy large and expensive stones: "Sears sells more diamonds than Tiffany's, but Harry Winston probably sells the most of all."

Buyers outside the U.S., exerting their own affluence, are also plunging into the diamond market. Sales are expanding twice as fast in Europe as in the U.S., and jewelers boast that they are successfully "educating" young Europeans in the American custom of buying diamond engagement rings instead of simple gold bands or no rings at all. At the same time, Japan has eased its barriers against luxury imports, last year spent $11.5 million for diamonds.

Stones Under the Sea. Producers have lately begun to increase their output, but only slightly. Black Africa is making its first major effort to expand its mining and marketing; mines in Sierra Leone and Liberia have increased production. For the first time in 56 years, De Beers has reopened its big Old De Beers mine, using modern equipment to extract stones that once were thought uneconomic to mine. It has also helped to bankroll a Texan named Sammy Collins (TIME, Nov. 9, 1962), who is digging diamonds from under the sea off the coast of southwest Africa. But no dealer fears that production will ever rise high enough to hold down prices or remove any of the glitter from a girl's--and a dealer's--best friend.

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