Can Gem Diamonds' share price recovery stay on track?

With the share price recovery now a year old, this analyst looks at what the future might hold. 

The diamond market is a funny old place. With commodities, you can either weigh them or measure them, but diamonds differ, due to their value being a matter of perception. 

The famous 4C’s of diamond quality; Colour, Clarity, Cut, and Carat Weight join together, and the outcome gives a pretty definite number. A 1 carat diamond is worth anywhere between the $2,000 mark and $12,000 US dollars.

Of course, some diamonds completely break the mould. Gem Diamonds was famous for the fabulously pretty Letšeng Diamond, a pink coloured frivolous rock which sold at auction for just under US$9 million. Once polished and cut, the resultant teardrop shape fitted nicely into a gold ring! 

For those interested in such matters, Gem Diamonds’ (LSE:GEMD) web page has a gallery of “Our Famous Diamonds” which is worth viewing, once you finish pondering the pictures of their massive operations in Lesotho and a truly intimidating hole in the ground.

Once finished with the company website, but still aghast at the vast sums of money attached to gemstones, we were expecting to be dazzled by the company share price performance. Instead, since 2008, the stock market seems unimpressed. 

However, in March of this year, their share price finally broke through its long-term downtrend and, while not showing any interest in returning to its historical 12 quid level, there are a few useful potentials visible for the future.

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The immediate picture is a little confusing, thanks to the price breaking below the Red uptrend since 2020, quite firmly implying we should expect weakness below 57p to drag the share down to 50p next. We’d hope for a bounce from such a level, especially as, if broken, the share could opt to head downhill to a hopeful bottom of 39p. For now, we suspect somewhere around the 50p mark is the market intention.

Source: Trends and Targets. Past performance is not a guide to future performance

But it’s not all bad news.

Thanks to the price breaking through its immediate Blue downtrend, there’s a reasonable hope the share price is ‘just’ experiencing a complex route for longer-term price recovery.

This being the case, any recovery capable of exceeding 71p is liable to prove useful, as this looks capable of triggering movement to an initial 93p. Should the 93p level be exceeded, our longer-term ambition calculates at 117p, a point where the visuals on the chart demand we again revisit the price to examine future possibilities.