Investing in diamonds sounds scary and many people will argue that diamonds are not a good investment, however many people do not treat it the same as another commodity. For example, if we were to take two individuals. One is an investor, and another is simply a consumer, the investor would buy gold on an exchange market and the consumer buys a gold watch. 10 years down the line, the investor who bought the gold on the exchange would
have most likely made a decent return on his investment, whereas the consumer most likely lost value. This comes down to the fact that the investor would have bought the gold at spot value (wholesale/market value) and the consumer bought the watch at a retail store with a 100-200% mark up.
The same principle applies when investing in diamonds, as an investor you want to obtain the investment as close to wholesale as possible.
However, it is not as simple as buying ANY diamond at a wholesale level. The market changes from decade to decade and like with many investments a professional broker needs to be consulted with in order to make the correct investment.
White vs Fancy
White diamonds are the diamonds that most consumers are aware of. Starting with the “D colour” being the whitest diamond, having the purest carbon structure and ending off with a “Z colour” with a clear yellow undertone.
The most valuable diamonds amongst the white diamonds are the D colours and then moving alphabetically towards Z. However, when looking at white diamonds to invest in, the important factor is not only the colour alone, but also the clarity. The top investment clarities are VVS1, IF (internally flawless) and Flawless, where flawless is the most sought after due to it being internally flawless as well as externally. Essentially it is perfect.
Image1 :https://www.nationaljeweler.com/fashion/jewelry-auctions/6493-sotheby-s-sells-100-carat-round-for-record-per-carat-price
Fancy diamonds are stones that come in different colours, such as yellow, pink, blue, green, orange, purple, red, grey and black. They are measured by their saturation intensity starting from light, fancy, intense, deep and finally vivid. The higher the level of intensity the greater the value of the diamond becomes.
Image 2: https://uniglodiamonds.com/fancy-colored-diamonds/
So how well do they perform?
When we compare a 1-2 carat pink diamond to various indices, we can obtain a better understanding of their worth. A comparison was done by Leibish, where they compared the pink diamond to the Nasdaq, S&P, Dow Jones, Gold, Coke and Berkshire Hathaway between 1995 to 2013.
Image 3: https://www.leibish.com/diamonds-continue-to-beat-warren-buffet-and-his-thirst-for-coke-article-864
In that decade pink diamonds appreciated drastically in value and since then they have appreciated another 100% from 2013 to 2019.
The slower appreciation in the recent years was due to the diamond industry facing difficulties and an influx of diamonds. However, with the argyle mine (in Australia), which produces the most pink diamonds in the world, closing down. It is estimated that this will expect to cut world pink Diamond supply by 90%.
Pink diamonds demand will increase, and their supply has decreased. With only a handful of larger pink diamonds available, their prices are believed to soar over the coming years.
Image 4: https://www.leibish.com/diamonds-continue-to-beat-warren-buffet-and-his-thirst-for-coke-article-864
Other studies have shown that after a global decline in stocks and commodities, shortly afterwards there is a sharp increase in the value on pink diamonds as people move towards tangible assets.
In conclusion, the best options when investing in diamonds are the pink, blue and reds. Though these are also the most expensive and require large budgets to acquire, the investor can then look to the classic D Flawless and fancy yellow diamonds as an alternative. If this is something that sounds appealing to you head through to our investment page to make contact with us.
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