Diamond prices could go up in the next few months as miners search for new sources of the gems and investors snatch them up to hedge their portfolios.

Two of the world's largest diamond producers, De Beers and Harry Winston, have said they see prices increasing in the near future.

The reasons are two-fold as investors renew their appetite for diamonds and both mining production and exploration remain significantly below year-ago levels.

Tom Tweedy of De Beers Consolidated Mines in South Africa told QMI the company would suspend extraction at its small Namaqualand mine for the next year or two.

"We are going to wait until the situation improves and we've got a different environment to operate. With the recovery in the diamond market we're planning to reopen," Tweedy said.

The mine produces 1% of De Beers' South African diamonds and only about 0.10% of De Beers' worldwide production. The mine typically produces 50,000 carats a year.

The cost of De Beers diamonds are not expected to be affected by the closure, Tweedy stressed.

Still, this year the company only produced about half of what it did in 2008.

"It's not back at last year's levels yet but we're operating in a different world."

"Although our industry might not see the same sales levels in the next few years that we enjoyed in 2007 and early 2008, we anticipate a steady growth in demand over the next three or four years, and the long term looks bright," said De Beers President and CEO Jim Gowans in a recent statement.

Earlier this week, Harry Winston reported lacklustre profits after a temporary closure at one its Canadian mines in the Northwest Territories this summer.

But Harry Winston Chairman and CEO Robert Gannicott expects his company's fortunes to improve as rough diamond prices and retail sales continue to rise amid lower supply cycles.

stefania.moretti@canoe.ca