In the world of finance, investment in gold or other precious metals, works of art and real estate is an important diversification of assets that should not be excluded from an evolved investor’s portfolio. In India and in China, for example, a large amount of savings is allocated to the purchase of gold (hundreds of tons per month) thanks to a deeply rooted cultural tradition of safeguarding against an uncertain future.
This graphic shows the demand for gold from China and India each month.
The bottom part shows the cumulative monthly quantity.
Note that year after year, the monthly demand for gold from these two countries alone exceeds worldwide monthly gold mine production.
…and this doesn’t include Russia!
Gold and diamonds are a long term store of value, and even despite several years of decline, they have retained their purchasing power over thousands of years unlike many paper currencies that have been devalued or even completely eliminated over time. For example, it was gold that sustained the British pound in the early 800s, which today is worth more than $250 against the actual value of the pound. Similarly, the gold that supported a single U.S. dollar is today worth much more than the paper money printed over 40 years ago.
In addition to being an investment with long-term value, gold and diamonds are a form of currency that can act as an insurance policy against a dangerously indebted financial system, guaranteeing solid protection against potential financial disasters that could revolutionize the current business model.
The diamond, like pure gold and other such goods, represents excellence, if not the pinnacle of the concept of a safe haven investment. Although it has been relatively underestimated until recently, I believe that diamonds have certain intrinsic characteristics that make them an even better investment compared to their equivalent in gold.
A diamond packs a great value in a relatively small volume/weight that can be easily transported from one part of the world to another. Compare, for example, € 1,000,000 in diamonds to the same value in gold. A € 1,000,000, 8-carat, D-IF diamond measures just 13 mm and weighs 1.6 grams, while € 1,000,000 in 24-carat gold would result in a volume equal to one 30-pound suitcase. Such a comparison is even more striking when compared to works of art, and incomparable when talking about real estate.
Price fluctuations in recent years show that diamonds maintain a slow but steady increase in value over the years (thanks to price controls put in place by De Beers), while gold is often the result of speculation that leads to high price volatility. Even some of the most traditional safe haven investments such as art and real estate have lost some of their appeal and value in recent years due to market fluctuations.
Data taken from “Il Sole 24 Ore” official publications.
Instead, anyone who wishes to purchase an investment-grade diamond can remain invisible and free from taxation and management commissions. In addition, taking ownership of a diamond will not attract attention from third parties, a feature that few other goods can boast.
Unlike gold bullion or other financial products, a diamond owner can enjoy its extrinsic beauty by wearing it (mounted in rings, earrings, necklaces, etc.) without altering the value of the stone whatsoever. I would also not underestimate the pride and satisfaction of ownership: by setting aside a small portion of your assets for the purchase of diamonds, the owner possesses one of the world’s most precious goods, that can then be passed down to future generations.
I won’t dwell on the many aspects that make an investment in diamonds a solution worthy of consideration, instead, I’d like to focus on dispelling some of the myths and outright falsities that have kept some investors at arm’s length.
One of the greatest deterrents is the fear of buying a “fake” diamond or being tricked into purchasing a diamond with false credentials. In my opinion, the days when you could simply put yourself in the hands of any jeweler and expect fair and honest treatment are over. Today, as long as you take a few important precautions, most anyone could go out on their own and buy a diamond.
Once you have defined the quality and size that you’re looking for, it is essential that you buy a diamond with GIA, HRD or IGI certification, i.e. certified by one of the three internationally recognized and accepted institutions.
It’s even better if the diamond is sealed and laser inscribed (original logo with its certified identification number) on the stone’s girdle by the laboratory. This way, the diamond in question becomes a clearly identifiable and unique article (just as a vehicle identification number uniquely identifies an automobile). This gives the buyer the opportunity to compare the price in any commercial establishment or financial institution.
This inevitably makes the industry more competitive as dealers work to buy at the lowest price over the competition. This healthy competition is even better for the end customer, significantly lowering the spread between the original price and the end price. The end benefit derived therefore makes it possible to disinvest (i.e. re-selling the diamond) with a much lower penalty compared to the past. This follows the logic that, if the base purchase price is good, the resulting sale price will be even better.
It should be emphasized that many companies who operate in the investment diamond sector offer their customers the option to buy back the diamonds sold, guaranteeing a fair market value. This debunks another cliche that often discourages potential investors because they don’t know where they can go to recoup their investment.
Equally unfounded is the concern of diamonds not having an official market price. To refute this assumption, you can consult the Rapaport Price List (officially recognized as the reference for diamond dealers around the world) where you can easily verify the price of any diamond on the market. You may also consult their annual report, the Rapaport Diamond Price Statistics, that shows the trending price of each diamond, which will allow you to draw useful considerations for future investments.
Finally, I would like to say a few words about the qualitative ideal for an investment diamond. In over 30 years of experience, together with the statistical reports that identify market fluctuations of all diamonds over the last few decades, I do believe that there are certain qualities and carat weights that are considered more important, and that every geographic area has its own preferences.
If I had to choose, I would concern myself first and foremost with meeting the parameters described above, and next, after having defined the budget for the investment, I would opt for the highest quality (D-IF triple Excellent-Nil with GIA certification). Not only because this is the highest performing diamond combination in the last 25 years, but also for the incomparable feeling of owning togheter with the most precious and rare good in nature, ie the diamond, even the most' exclusive among them.
