Diamonds Are an Investor’s Best Friend
November 3, 2016 | BY Keshia Hannam
How changing perceptions on the diamond trade are affecting the industry
Or are they? Diamonds might not be anyone’s best friend presently. In June 2016, Ernie Blom, President of the World Federation of Diamond Bourses, referred to the diamonds industry as one which has been significantly battered by a "perfect storm" of problems that name from “decreased manufacturing profits to lack of liquidity in the markets and the general criticism around the diamond industry.”
Martin Rapaport, founder of the eponymous diamond report, says China is largely to blame. The anti-extravagance movement has had a "strong effect on how people perceive diamonds" there. The average price per diamond, as per the diamond report, sits only slightly higher than it did in 2006, which is the lowest it has sat in the last 10 years. In addition, the sector is notorious for its lack of transparency, which adds another layer of difficulty for investors when asserting the risk factors as compared to the potential profit opportunities. Mix this with challenges in seeking out accurate, up to date pricing, and the matter becomes further convoluted. Things are looking up though–Stephen Lussier, head of De Beers’ Forevermark brand, and Alan Davies, head of Rio Tinto’s diamonds & minerals unit, both agree China will rebound by 2017. China’s diamond market has grown the fastest in recent years, and now sits as the second largest market (behind the USA) for diamond sales. Bloomberg notes China comprises roughly 13% of the $85-billion-a-year global market, and as such De Beers, the global industry leader, is moving to change its landscape of consumer-based economy to this promising China market.
So why invest in diamonds?
Diversifying a portfolio with diamond investments makes sense for a couple of reasons. Diamonds are very durable, tangible, moveable and rare. An asset that doesn’t lose value over time, diamonds are easily convertible worldwide, and a particularly prevailing positive given our current epoch; diamonds are unlike stocks sensitive for political uncertainties or public opinion.
But, Nissan Perla of Diamond Registry reminds us: “Diamonds are a good investment for everyone if you know what kind of diamond to buy. As generally all value items have their ups and downs but the top products also with diamonds always stays a good investment due to limited supply. The diamond demand in the market is stable and has become stronger, and interest in gems increased and knowledge over diamond quality among the privates is improving and therefore plays a more important role.”
Further, in an era where yields are becoming increasingly complicated to find, investors might be interested in diversifying portfolios, and diamonds do provide a channel by which to do so. In addition to being an investment, diamonds also buy the key to someone's heart, so in terms of emotional investment there is nothing that can quite compare.
White diamond prices have fluctuated greatly over the past five to 10 years, according to Sally Ryder of Ryder Diamonds, both up and quite considerably down over the past three to four years. “We've seen record breaking sales at Sotheby's auctions for pinks and blues [diamonds], as these are seen to be exceptionally rare and sought-after gem stones. Although, not all diamonds can offer the rarity and prized value of these beauties. To be considered investment worthy, a diamond needs to be something very special, which usually also means it comes with an impressive price tag. This puts them in a category of investment only few are able to consider, making the pool of potential buyers limited.”
What’s the best way to actually buy one?
Ryder tells her clients to buy diamonds with your heart. The wearer will love it, cherish it and hold it close for their heart for what it means to them. “I encourage the buyer to consider the future value of the piece, and since this diamond will become a symbol of a significant occasion in the wearer’s life, it should be bought to stand the test of time (not many of my clients have ever complained that their diamond is too big years down the track!).
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