Popping the question gets cheaper as recession hits diamond industry

For bachelors like John Heywood, now's the time to pop the question.

Whether it's the US$50,000 ($87,570) 5-carat marquise set in platinum, down 25 per cent from two years ago, or the Amazon.com variety with a tinge of yellow that's going for US$89.99, diamond prices are the lowest in five years.

"I've got a budget of about £6000 ($15,700) and want to see how far I can stretch that," said Heywood, a 32-year-old salesman, as he studied the window displays on Hatton Garden, London's diamond-shopping centre and the setting for Snatch, the 2000 gem-heist film by Guy Ritchie. "I'm happy to see some shops offering discounts."

The US$65 billion global diamond market is reeling. The price of polished gems dropped by an average of 31 per cent since an August peak as the worst recession since World War II deterred buyers of luxury items such as necklaces and earrings, according to diamond data company Polished Prices.com.

Antwerp, the world's biggest gem trading hub, has seen exports drop as much as a third. De Beers, the largest diamond producer, slashed output by 91 per cent.

"People are not buying earrings, bracelets, things they can do without if they want to tighten their belts," said Joe Boll, 36, owner of JP Diamonds on Hatton Garden, which opened about six months ago.

"They are still buying rings for weddings, engagement."

The slump is good news for buyers. Katherine Huang, a Boston-based consultant to jewellery buyers, said she helped a client from California with a US$50,000 budget find a ring in December for US$38,000 with a bigger diamond than he anticipated.

Rings with 3- to 5-carat diamonds of VS2 clarity and G colour - meaning they have no visible faults and are almost colourless - have dropped in price by as much as a quarter in two years, she said.

"Go for the larger stones, because the discount is greater," she advises.

Wholesale diamond prices have dropped about 20 per cent to 25 per cent from their highs around June last year, according to US internet jewellery retailer Blue Nile, which gets about 70 per cent of its sales from diamond engagement rings.

The average price of an engagement ring in the US US was $3200 last year, chief executive officer Diane Irvine said.

At the cheapest end of the market, internet retailer Amazon.com is selling a platinum ring with a 0.5-carat diamond for US$1675, down from a list price of US$3425. The gem's clarity is SI1 or SI2, meaning there are slight defects that normally can't be seen by the naked eye.

Jewellery retailers are suffering as buyers stay away or hang on for a discount. Signet jewellers, the world's largest jewellery-store owner, posted a fourth-quarter loss of US$424 million after writing down the value of assets.

Tiffany & Co, the world's second-biggest retailer of luxury jewellery, posted a 76 per cent drop in fourth-quarter net income.

About 15 per cent of jewellery shops in the US closed last year, Paramus, New Jersey-based watchmaker Movado Group said in April. Irving, Texas-based Zale, the biggest US jewellery chain, said in February it would close 115 stores.

Internet retailers and Wal-Mart Stores are aiming to undercut the remaining stores. Websites make it easier to compare prices. Heywood, the shopper in London, said he'd been using Blue Nile to research prices before heading to the shops.

For some, engagement rings are the bright spot.

"People are still getting married, thank God," said George Katz, 78, who has been in his family's jewellery business in Hatton Garden for 50 years, mostly selling diamond rings.

"Stable is good, considering how much worse things could be in light of what's going on in the economy."

- BLOOMBERG