The weakening US dollar was having a "very significant impact" on margins, De Beers MD Gareth Penny said on Friday.

Also applying pressure were high costs, but only a modest rise in the diamond price.

He said of the outlook for diamond sales in the run up to the crucial Christmas gifting season: "At the moment it's going okay."

He added that there "clearly" were problems in America with issues like subprime, housing and the economy generally.

Consumer desire for diamonds was, however, pretty robust and, at this stage, there were indications of a sales build-up.

Besides the dominant US market, there were also new emerging markets, particularly in Asia, but not only in Asia.

"In countries like Russia, for example, there is far greater consumer demand than we have seen in the past," Penny said.

Overall, the last few years had seen world demand rise by 4% to 5% a year and there was no reason why that should not continue or even increase.

At the same time supply was looking pretty flat, if not declining, but a price step-change had not accompanied this supply gap, as had been experienced in other commodity markets.

That was, however, normal for diamond prices, which traditionally moved up incrementally, generally tracking gross domestic product.

Bought as a luxury good, diamonds were not the same as other commodities in that they were the final product rather than an input product.

"So I don't think that you are going to see massive step-change in the diamond price that you see in those other commodities.

"But it works the other way as well because diamond prices don't come down like others do.

"The volatility of diamond prices is at most 10% in a year, and that's true even if you look at the bubble years in, say, Japan, where there was huge consumer demand.

"What I do think will play a very significant role is that China and India right now are in a primary industrialisation phase and clearly that would precede a secondary phase where things like diamonds or other luxury products would tend to see a greater portion of general growth and consumer demand.

"I think you are going to see a steady, sustained price situation in diamond industry and you are not going to see massive step-change," Penny said.

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