The world of diamonds might become more interesting beyond the scope of engagements and weddings.
Diamond prices have tumbled almost 15 percent over the past 12 months and that has Nicholas Colas, chief market strategist at Convergex, eyeing a larger trend. (Tweet this)
"The reason all this intrigues me is not as a prospective shopper, but rather because the price of 'Commodity' diamonds is a very good case study in macroeconomic deflationary pressures," Colas said in a report for clients.
The decline in diamond prices can be attributed to several factors, he said, including reduced consumer demand from China, India and Japan. But companies that turn raw stones into polished gems are also facing financial pressure as banks are less willing to lend. Slower demand, tighter capital requirements and too little inflation "is causing a slow-motion inventory shrink and pushing prices lower," Colas said.