With the figure mentioned above, gold must be extremely expensive this year. However, why it did not went up? There is no massive inflation because of the unprecedented selling from the different sources in the West. The sources includes heavy ETF gold redemptions, banks short selling in the futures market, as well as mobilization of private gold stocks controlled by the US Treasury, Bank of England and bullion banks. The gold market is still in the balance and it is advisable for investors to make investments now while the price of gold is within reach.
The demand for diamonds is still great and the supply scarce. Diamond engagement rings are no longer seen as the only accepted form of engagement rings; therefore people look to cheaper alternatives. Although substitutes for diamonds are increasing in popularity and diamonds are no longer seen as the only symbol of love, are still in high demand. The interdependence of firms in the oligopoly market structure stabilizes diamond prices and still allows for the firms’ profits to be maximized. De Beers and the Central Selling Organization monopoly managed to set the price of diamonds extremely high.
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In order for the value of diamonds to remain as high as they were during the phase in which they were still rare, a diamond cartel was introduced. A cartel is defined as a group of firms that gets together to make output and price decisions (Cartel Theory of Oligopoly, n.d.). Hence, the diamond cartel aimed to maintain high prices to maximise the profits of the suppliers by restricting the supply. This essay will analyse the history of the diamond cartel, including diagrams that illustrate what the price of diamonds would be with or without the use of a cartel. The notion that diamonds are the only suitable stone that can be used in engagement rings will also be commented on.
A cartel is defined as “an international syndicate, formed esp. to control prices and output in some field of business” (The Free Dictionary 2009) and “De Beers” fits this definition very well. Over the past 120 years, they have been instrumental in controlling the price of diamonds. The following essay will give a brief history of the “De Beers Mining Company” and the diamond industry as a whole. It will also discuss several arguments which support the statement of diamonds being priced to highly and shed light on the connection between diamonds and marriage.
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