De Beers Consolidated Mines Ltd. yesterday stunned the world diamond market by imposing a 40 percent, across-the-board surcharge on the prices it will charge for rough stones at a regular sale next Monday in London.
Behind the move by De Beers is a wave of speculation in diamonds that has sent prices soaring in the past 12 months. Prices of some smaller gems have more than doubled in six months, and diamonds have become an investment strategy in the new age of inflation.
De Beers mines diamonds on its own but its world prominence is based on a long domination of the marketing of diamonds through a Central Selling Organization, where ae ae a estimated 85 percent of all diamonds exchange hands.
Diamond sales are called "sights," and the next one is planned for Monday, although purchasers could reject the diamonds to be offered with surcharges next week, that is considered unlikely because once a purchaser turns down a share of gems, there are no invitations to future sights.
Tiffany & Co., the prestigioius New York firm that is the worlds biggest diamond retailer, has expressed alarm at soaring diamond prices and warned that it may counterattack against speculators who have boosted prices.
An advertisement in the New York Times from Tiffany last week said, "Diamonds are too high . . . we suggest you look before you buy." And, in an interview from Palm Beach, Fla., yesterday, Tiffany President Henry B. Platt said "American consumers must be alerted . . . this is very serious . . . we want to blow the whistle on the speculators."
Platt said Tiffany has decided to hold the line on prices for the time being because of its own inventory of gems purchased before prices began to sour. He called the De Beers surcharge "counter-productive."
According to some market observers the source of recent speculation has been in Israel, a center for cutting rough stones. Israeli traders allegedly have been bidding prices higher, and De Beers reportedly decided to add a surcharge to maintain its ability to buy rough diamonds from such producing countries as the Soviet Union and Sierra Leone.
World economic conditions and weak currencies, including the U.S. dollar, are said to be behind both the speculative activity in Israel and a new interest in diamond investing in this country. But Tiffany's Platt said the major boosting prices was speculation from broad and not hoarding in his country.
People have been collecting, treasuring and fighting over diamonds for more than 3,000 years. Now, people with money are searching for something with a track record of price appreciation - something less voltaile than gold and more readily convertible to cash than admittedly lucrative Washington real estate.
For some of these persons, the search has ended with a discovery of diamonds - jewels said to be perfect for parties and retirement funds at the same time.
Investors are attracted by a tripling of wholesale diamond prices since 1973 and an annual appreciation of 20 percent to 30 percent since the late 1960s, according to Anthony C. Seymour, principal partner in the firm of Charles Anthony Jewelers of Salt Lake City.
Seymour has been to Washington recently, stopping over on trips between the diamond-mining centers of South Africa, diamond trading centers in London and New York and his company's headquarters in Salt Lake City's restored Trolley Square complex.
An American pointer in the investment diamonds business, Seymour has been conducting investment seminars in the Washington area to explain how individuals may diversify their portfolios with gems.
In an interview, Seymour said he expects to make affluent Washington a "major thrust" of future marketing efforts for diamond investment programs. A D.C. firm, Commemorative Marketing & Communications Consultants, will represent Charles Anthony Jewelers in this area as a broker - arranging for pickups and deliveries or diamonds but not not holding an inventory.
"People want to convert dollars to diamonds . . . it's a lack of confidence in the dollar," Seymour said.
Although he emphasized that diamonds come with no guarantee of price appreciation, the State of California has cleared diamond investing as qualified for retirement and pension plans. One group of doctors there, with an overall investment portfolio of $1.5 million, holds $700,000 worth of diamonds.
Seymour's company has all of its gems certified by two recognized appraisal laboratories. Most persons who buy diamonds for investment purposes hold them in safety deposit boxes or in their homes.
Potential price appreciation is the main attraction of diamonds today, with a one-carat diamond that sold for $30,000 in December jumping to $24,000 by January. The fastest price rises have been for smaller gems, however, Seymour said investors also are attracted by:
General stability of prices accomplished through periodicii releases of diamonds to the market by DeBeers, as marketer for the international diamond cartel. DeBeers stored diamonds during the Depression to protect prices and has purchased diamonds to support prices. Nevertheless, some experts forecast that a crash in diamond prices may follow the current speculative boom.
Easy exchange for cash; with 16 diamond trading centers where millions of dollars of diamonds are exchanged daily, there is an immediate resale opportunity for a diamond owner.
The Salt Lake diamond retailer pointed out in his Washington seminars that, while persons can buy diamonds as individual investments and still use the gems for jewelry, different rules apply for pension funds and retirement accounts.
Diamonds qualify for these only when the plans are self-directed and so long as there is no personal use of the diamonds.