Low interest rates, the search for alternative assets and Asian demand are all conspiring to drive diamond prices up by 50% over the last 20 months. Price surges over the last six months have reached historic highs, according to the Financial Times:

The value of top-quality polished diamonds of 5 carats, or 1 gramme, has risen to about $150,000 a carat, up from about $100,000-$120,000 a year ago, according to PolishedPrices, which compiles data on the wholesale market. Other categories of polished and rough diamonds have also risen.

Rough-diamond prices were hit hard during the credit crisis, but saw support in 2009 after the leading producers, including De Beers of South Africa, held back supplies to push prices up.

“Constrained supply, particularly for large, high-value stones, looks set to continue for the foreseeable future,” said Jon Bergtheil, analyst at Citigroup.

The production cuts depleted inventories, which, combined with the surge in Asian demand, have contributed to record prices, industry executives said.

Diamond Prices Soar on Asian Demand (Financial Times)