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New York--Certified polished diamond prices increased in 2011, with strong buying in the first half of last year enough to offset a soft second half, the RapNet Diamond Index (RAPI) for 2011 shows.

According to the RAPI, half-carat and 1-carat polished diamonds showed the strongest price appreciation in 2011, increasing 20 percent to 34.39 and 19 percent to 96.96, respectively.

Prices for 3-carat polished diamonds, up 18 percent, and 2-carat polished diamonds, up 15 percent, also appreciated strongly while prices for 0.30-carat stones fell 1 percent.

According to the just-released Rapaport Diamond Price Statistics Annual Report 2011, an aggressive, overheated rough market driven by easy credit in the Indian market, speculative demand and restocking in the Far East and United States fueled the price increases in the first half of the year, between January and June.

From June on, economic uncertainty in the U.S. and European markets, along with volatile financial, currency and commodity markets and political instability in the Middle East caused prices to soften.

Tight liquidity, particularly in India, where manufacturers were unable to obtain replacement costs on the high rough prices paid earlier in the year, and weak currency markets also kept prices down, the report states.

These factors are expected to continue to impact the market in 2012, though Rapaport Group Chairman Martin Rapaport notes that U.S. demand for polished diamonds is expected to remain stable following a satisfactory holiday season.

“Prices have stabilized over the new year but uncertainty prevails due to adverse economic conditions,” Rapaport Group Chairman Martin Rapaport said. “Rough prices are declining as the European crisis significantly reduces liquidity to the trade. Chinese and Far East demand held up well over the holidays and will likely remain stable during 2012. U.S. demand held up well over the holidays and will likely remain stable during 2012.”

The RAPI is based on the best asking price in hundred $/ct. for the top 25 quality 1-carat round diamonds (D-H, IF-VS2, RapSpec-2 and better) with grading reports from the Gemological Institute of America, HRD Antwerp or American Gem Society Laboratories offered for sale on RapNet, the Rapaport Diamond Trading Network. The RAPI is provided for various sizes.