Diamonds: why it’s a good time to invest
This week the global gem-mining giant De Beers Group revealed that the world’s diamond supplies are running out. Despite recent economic hardships, the choice to invest in diamonds now may be a wise one.
According to the mining company, diamond mines are getting scarce and will eventually become history. De Beers has decided to reduce its production in order to extend the life of the mines.
The depletion in diamond mines will have a direct impact on the prices of stones. Diamond analyst at Royal Bank of Canada Capital Markets, Des Kilalea, explained that owing to the moderated output, diamond prices could rise by at least 5 percent every year for the next five years.
De Beers is responsible for 40 percent of global diamond sales, but this figure is now likely to decline. The company had an astonishing record of producing 48 million carats per annum, but will now reduce their diamond production to 40 million in 2011.
Global Trends in Diamond Demand
There is debate whether the diamond industry is a manufacturing, natural resource, or a consumer industry. Many factors contribute to the rise and fall of diamond production and purchase which can be reviewed as global demand trends.
According to the IDEX Online Polished Diamond Price Index, average day-to-day polished diamond prices have remained steady for the last eight consecutive months, rising a mere 0.1 percent in November month-over-month. The IDEX Online Diamond Price Index is a real-time index constituted from actual asking prices in the global diamond industry: it therefore objectively reflects price trends as they occur.
Whilst rough diamond prices are higher, consumer demand for diamonds and diamond jewellery has been tenuous for over the past year which has kept polished diamond prices low. Year-over-year prices have dipped for polished diamonds for the past eleven months and prices remain 10.1 percent below last year’s average.
A Diamond is Forever, and in Terms of Investment Value, Will Always Last
The phenomenon and lust of a diamond has stood the test of time. Diamonds were once believed to possess special healing and mystical qualities, and in 1477 a tradition was born when Archduke Maximillian of Austria gave Mary of Burgundy the first diamond engagement ring. Countless references in every aspect of modern culture engrain the tradition even more, ensuring that the popularity will never falter.
Hence, in this sense, it is reasonable to suggest that any purchase of a diamond is an investment. However, in terms of profit and business investment, it is much more specific. If the outcome of the investment of the diamond is set on millions of profit, such as stones that are seen auctioned at legendary Christie’s, for example, then size and quality does matter. Taking into account the Four C’s (for more information, please see our Diamond Buying Guide) is the most important factor as the rarer the diamond, the more sought-after and the more it is going to be worth in monetary value. D-coloured and Internally Flawless stones of a significant carat weight are going to be the money-makers. Fancy coloured diamonds such as Canary diamonds and pink diamonds will also be valuable, due to their rare beauty.
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