Diamonds: I love them, I desire them, but mostly, I respect them.
After 27 years as an international diamond merchant, jeweller and diamond specialist, I have watched my interest in diamonds evolve from seeing breathtaking jewellery to recognising alluring investments.
How things have changed in this market. Back in the 1980s and 90s, investment diamonds were enormous and very expensive: they were diamonds of least 20 carats which were locked away in vaults across the world.
However since 2009, the diamond industry has enjoyed double-digit growth figures for rough diamonds. Couple this with plummeting diamond production figures because of the financial crisis and you have the recipe for a strong investment choice. They no longer need be 20+ carats to be considered as investment purpose stones.
An investment stone is carefully graded, and size alone does not necessarily make an exciting proposition. The colour, clarity and cut must all be of excellent grades, and certification from a premier house (such as GIA, IGI or HRD) is crucial.
So why isn’t everyone running out to purchase this dynamic investment vehicle? Well the fact is, there are no futures prices for diamonds. So unlike precious metals such as gold, whose prices are freely available, diamond prices are only quoted in the industry ‘bible’ Rapaport. But it’s only available to pre-vetted industry insiders.
Because diamonds are so complex, it is also very difficult to commoditise the diamond market. A successful investor needs years of study in order to buy investment stones with confidence.
Why investors choose diamonds
Like gold or real estate, diamonds are a tangible investment. You can see and touch them. With increased governmental debt in the western world, the decline of several major currencies and volatile equities markets, tangible is good.
They are also beautifully practical. An investor can transport thousands or even millions of dollars of diamonds with ease. I recall a lovely old diamond merchant once telling me “there is no law prohibiting a beautiful woman going through an airport wearing a large diamond”.
More fundamentally, their consistently rising value is making them all the more coveted. But unlike a typically popular commodity which attracts new suppliers and competition, the very basic law of supply and demand does not apply to diamonds.
With no new significant diamond mine discoveries in the last two decades, prices have continued to increase at approximately 15-25% year on year; larger, rarer stones have seen considerably stronger performances and have often doubled their estimates at auctions.
The global demand for diamonds is set to continue rising as emerging markets, predominantly China and India, continue to protect and increase their wealth. In fact the surge in middle-class households in India and China is expected to increase demand by 20% each year for the next five years.
But remember: I’m not talking here of the diamonds in high street windows. I’m talking about investment grade diamonds, the crème de la crème of stones due to their colour, clarity, size and cut parameters. These are so special, global production in one year will yield just 750 stones of between 1.00-1.39 carat, D colour, Internally Flawless. They must be shared between the diamond-loving women of the world, as well as increasing numbers of new diamond investors and indeed institutions and nations.
I believe in diamonds. They are small and beautiful yet carry a big value. And as well representing beauty, luxury and love, they even bring security as well.
No other investment can offer you that much!