The October RAPI confirms the small-stone reversal, with 0.30-carat prices down 5.5% as inventory builds

The October RAPI, published by Rapaport on November 3, answers the question our briefs have carried for two weeks, and the answer goes against the small-stone lead. The 0.30-carat index fell 5.5% for the month and the 0.50-carat index fell 2.3% after peaking in late September, while the 1-carat index slipped 0.9% and the 3-carat index rose 0.9%. Yesterday, we wrote that the index and the dealers still pointed in opposite directions. They now agree, and the softening in 0.30- to 0.89-carat rounds that Rapaport's October 22 comment reported has reached the index. The 0.30-carat index is still up 8.8% for the year, so this is a correction from a peak rather than a collapse, but desks holding 0.30- to 0.50-carat stock should mark it against October's print, not September's.

Rapaport ties the drop to supply: listings of 0.30-carat rounds in the index qualities on its trading platform grew 165% between June 1 and November 1, as manufacturers cut more of those sizes during the April-to-September recovery. Rapaport also reports that sales at De Beers' October sight were low because Indian factories were preparing to close for Diwali and sightholders had already bought ahead after the July price cut. Our read is that the Diwali pause gives factories time to work down the small-goods stock that drove the fall, which matters more for the next sight than the low sales at this one.

The shekel weakened 3.52% over the week to about 3.16 per dollar, extending the reversal we noted yesterday. That leaves our October 28 call that the shekel would hold at or below about 3.08 clearly broken. For Ramat Gan desks, a weaker shekel lifts the shekel value of dollar receipts and dollar-priced inventory, while the USD price of the stones is unchanged. The rupee firmed 0.39% to 94.75 per dollar, inside the quoting band. Gold near $3,944 an ounce is down 5.12% since October 5, a cost signal for jewelry metal rather than for stones.

Rapaport reports that Signet Jewelers and Richemont are in talks to join former De Beers chief executive Gareth Penny's consortium bidding for Anglo American's 85% stake in De Beers, with a deal announcement expected in the coming weeks. Our read is that two jewelry groups in a bid for De Beers would put buyers from the far end of the pipeline into the ownership structure of rough supply, and sightholders should watch what any deal says about sales terms.

Diwali falls on Sunday, November 8, and Rapaport expects Indian factories to close for 15 to 30 days, so rough buying and new polished output from India slow while the factories are closed. The nearest show is the Jewellery & Watch Show in Abu Dhabi from November 11 to 15, followed by Jewellery Arabia in Bahrain from November 24.