Investing in Diamonds - 2014
The subject of investing in diamonds has been discussed by every major media outlet over the last year. Some discussed the advantages while others focused on the negative side, but everyone recognizes that today it is a hot topic.
2013 was an exciting and record breaking year which included both a new world record price per carat set by the 14.82 carat Fancy Vivid Orange Diamond about 2 weeks ago in Geneva ($2,397,569 per carat).
And, the most expensive Fancy Color Diamond ever sold in an auction, the Pink Dream, a 59.60 carat Fancy Vivid Pink diamond sold for an astounding price of $83,194,250.
Color diamond prices continue to rise all while the demand has significantly increased.
Based on the current diamond supply, which has not gone up, and an everlasting growth in demand, we can safely assume that 2014 will be an exciting year for both the Jewelry aficionado as well as for investors. We have seen a further increase in demand from our Chinese investors for high grade Fancy Color Diamonds. Somewhat different from the United States, the Asian market clearly seeks quality over quantity. They are looking for the rarest of colors, such as Pink, Blue, and Red diamonds, and only look for the high quality stones.
On November 26, 2013, Tiffany & Co. (NYSE: TIF) reported a 50% increase in net earnings in its third quarter and concluded that natural Yellow Diamonds weighed in heavily in that change. We have noticed as well that there has also been a stable increase in demand for smaller Fancy Color Diamonds, mainly in yellows, and other various colors for jewelry by the ever growing middle class, which is predicted to grow three-fold in the next decade. This translates into over 750 million people, or twice the full population of the USA. This does not include the similar increase from India, where similar growth will also occur.
What About the Investment Community?
There exists quite a hunger for investment grade diamonds from the investment community globally. Everybody is talking about the concept of turning this unique natural gift to become an investment vehicle with unlimited derivative product possibilities. Different contributors to world economy such as management companies, to investment houses, to private equity, family office and huge sovereign Wealth Funds are showing interest.
Because it is not yet a path commonly taken, people are waiting to see which major corporation will be the first to get involved, and the next natural thing to happen is….for the rest to follow. They are all waiting to see who will be the one to lead; who will be the one to actualize what they all want, and big they want it. With trillions of dollars sitting on the sidelines ready to be deployed, who knows how a tiny fraction of it will affect demand. Will it create a de-balance in the system, or will it affect it to the point where most of the diamonds will be out of reach for most of us and will force us to settle for synthetics which are breaking grounds.
The only way to know is to just sit back, relax, and let time do its thing!
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John Peterson, Guest Contributor to MiningFeeds.com
About the author: John Peterson works with Leibish & Co., colored diamond experts based in Israel.