Dollar Weak, Gold Strong, Diamonds Squeezed

Uncertainty over US tariffs, China’s slowdown, and geopolitics has dominated industry headlines this year, but two additional forces are quietly exerting pressure on the trade: currencies and commodities.

The US dollar has been on a weakening trend since January, while gold has surged to record highs, breaking through $3,650 per ounce this month. Those opposing moves are hardly unusual, since investors often treat gold as a hedge against both a soft dollar and inflation.

We’ll leave the deep macro analysis to the economists. What matters for the diamond and jewelry trade is that these shifts are affecting cost structures for miners and manufacturers, while quietly changing what consumers prioritize in their jewelry purchases. Together, they are forcing the industry to rethink pricing, product mix, and profitability at every stage of the diamond journey.

Currency and Commodities

The ICE US Dollar Index (DXY) – a measure of the greenback’s value against a basket of six major currencies – has fallen about 11% so far this year, pressured by expectations of US rate cuts and swelling fiscal deficits.

Based on changes in ICE US Dollar Index. Data sourced from investor.com.

The instinctive assumption is that a weaker dollar helps exporters, since U.S. buyers pay in dollars and those receipts convert into more of the local currency. Producers also tend to benefit, because most raw materials are priced in dollars, so a softer greenback usually pushes global commodity prices higher.

That pattern holds for exchange-traded commodities like gold and oil. When the dollar weakens, they become cheaper in other currencies, which lifts demand and usually drives their USD prices higher. That’s why the dollar and commodities often move in opposite directions.

Diamonds, however, are different. They’re not exchange-traded because they aren’t standardized. Prices are set through tenders, contracts, and dealer negotiations, with each category subject to its own market dynamics. As a result, the currency effect on the diamond pipeline is far more nuanced.

Pressure on the Pipeline

Consider De Beers as an example of how currencies affect mining costs. De Beers sells its diamonds in dollars but pays much of its operating costs in South African rand and Botswana pula. Both currencies have strengthened against the dollar this year — the pula being closely tied to the rand — which means each dollar of revenue converts into fewer local units, while local expenses translate into higher reported USD costs.

The result is that unit costs appear higher in dollar terms even if the company’s local spending hasn’t changed. De Beers has guided 2025 average unit costs at about $94 per carat, slightly above last year’s $92, reflecting broader industry pressures, and despite the softer dollar.

The effect is different for manufacturers, who typically buy rough in dollars and sell polished into export markets. A weaker dollar should give them a boost, since their rough import costs fall in local-currency terms.

They also gain an edge when exporting polished to the US, because cheaper rough allows them to hold polished prices steady in dollars while protecting their margins. The trade-off comes later in the accounts: once those receipts are converted back, each dollar buys fewer local units.

The caveat for Indian manufacturers is that the rupee has actually weakened against the dollar this year, by nearly 5% from January through mid-September. That reversal makes rough imports more expensive in rupees, with the only relief coming when dollar receipts from exports convert back into more local currency.

Of course, currency is just one variable. The bigger drag for Indian manufacturers right now is the 50% US tariff they face. Not only do other — smaller — cutting centers enjoy much lower US duties, but they also capture the net gain from a weaker dollar in their markets, an advantage India currently lacks.

Gold’s Rising Share

If currencies complicate the picture for miners and manufacturers, commodities add another layer of pressure. Nowhere is that clearer than in gold, which has surged to record highs this year, increasing the share of a jewelry piece’s cost that comes from the metal itself.

The more consumers spend on gold, the less room there is in the budget for the diamond. That forces jewelers to adjust designs, karat and carat weights, or overall price points.

Signet Jewelers offered one illustration: inventory values were flat year on year in the latest quarter, even though gold costs had risen by more than 30%. That suggests bullion is taking up a bigger share of each piece, leaving less space for diamonds and putting pressure on jewelers’ profits.

Based on changes in US dollar spot gold price. Data sourced from investor.com.

The latest World Gold Council (WGC) data confirms the squeeze. Gold jewelry consumption fell 7% year on year to 30 tonnes in the second quarter, continuing a three-year downward trend. By value, though, jewelry demand jumped 30% to $3 billion — a reflection of higher prices. In short, consumers are spending more but getting less metal.

It hasn’t all been negative for jewelers. In China and India, weight-based gold sales surged as consumers bought aggressively into rising prices, lifting revenues even as volumes fell. Over the past two years, strong gold sales have often offset weaker demand in their other categories. Meanwhile, the consumer gold rush has eased more recently, as buyers wait for a pullback from current record levels before re-entering the market.

In the US, however, the surge in gold represents another challenge for the diamond industry. Jewelers are forced to adjust other components in a piece to protect margins, while still holding consumer attention and honoring their design integrity.

Taken together, the weaker dollar and record gold are shaping the economics of diamonds and jewelry in ways that can’t be ignored. They’ve become part of the expanding set of forces driving change in the market. As long as gold remains high and the dollar weak, the industry faces a familiar balancing act: sustaining demand, safeguarding margins, and adapting to the new forces driving volatility.