Phone: 989.631.9080
Fax: 989.631.9195

Diamonds as an investment

The investment parameter of diamonds is their high value per unit weight, which makes them easy to store and transport. A high-quality diamond weighing as little as 2 or 3 grams could be worth as much as 100 kilos of gold. This extremely condensed value and portability does bestow diamonds as a form of emergency funding. People and populations displaced by war or extreme upheaval have used this portable asset successfully. Not everyone trusts banks. In some cultures and countries often +10% of wealth is “portable”. Cashing in gold and diamonds helped many Chinese escape from Indonesia in 1997.

Some women consider their jewels as security or “running away assets” (few diamonds are returned if the relationship ends).

Jewels are emotional or family investments; a band of diamonds marks a child’s birth, a ruby bangle for a 40th wedding anniversary etc. They are usually an important part of an inheritance. The more love in the family, the higher the non-monetary value.

A $100,000 diamond ring has more ‘investment’ potential than a $1,000 ring. You do not buy a $1,000 painting hoping to sell it in a few years for $5,000. There is relatively less cost to selling an expensive piece; as the value goes up, seller’s margins come down, just like in real estate.

Diamonds, unlike metals, are not detectable by airport scanners

In 2009 an exchange was launched by DODAQ to trade categories of polished diamonds. The DODAQ exchange is intended to be a terminal market for round, polished, certified diamonds (the most liquid part of the market).

Rare “fancy colored diamonds” such as yellows, pinks, blues and greens have proved to be a secure investment over the past five years. This is based on the principles of supply and demand as well as new economies entering the market.

In its Global Diamond Report 2014, Bain & Co reports that demand for investment diamonds accounts for 5% of the total market of polished diamonds. It also reports that diamond prices have benefited from 1.6x lower volatility than gold. Characteristics of investment-grade polished diamonds are highest color (D, E, F) and clarity (IF, VVS1, VVS2), weights ranging from 1 to 10 carats, triple-EX grading (Excellent Cut, Excellent Polish, Excellent Symmetry-see AB&L article), and no fluorescence.

Pricing formula
There is the Tavernier’s law (or Indian law) to determine the price of a diamond. The formula is for basic calculation and demonstrates how the price of a diamond increases along with its size. Larger gemstones are rarer and go up in price in great leaps and bounds. The diamonds of 25 carats and more have their own names (Hope, etc.).
Price = W^2*C
W is the weight in carats
C is the basic price of a one-carat stone
Here is how the price of a diamond might go up with the formula applied to a $1000-per-carate base price:
1ct = $1,000
2ct = $4,000
5ct = $25,000
10ct = $100,000

§ Recycled diamonds

· Diamond, because of its hardness, is one of the few gemstones that has a truly robust, vibrant recycled market. Recycled diamonds are diamonds that have been polished and set into jewelry, then removed, sorted and re-cut for sale back into the diamond industry. This growing sector now generates 5%-10% of market supply. It is expected that $1 billion worth of recycled diamonds to be put back into the market.

§ The market

· Diamonds of a certain size, generally half a Carat and above, are traded and processed by the industry individually. Each has unique attributes and a corresponding unique market place. Diamonds of this size, whether recycled or not, have a similar market price. It is impossible to tell the difference between a recycled one-carat diamond and a “freshly mined” one-carat diamond with the same characteristics. The market does not differentiate between them in price.
Diamonds of smaller sizes are traded in parcels of similar stones, called ‘melee’, after the French word for mix. Generally diamonds of exactly similar size, cut, shape, color and clarity are used in a single piece of diamond jewelry . If not, the stones would not match and the piece would not sell. Small recycled diamonds are treated differently from large individual stones. So why buy jewelry as an investment?

OK, you want to buy something that will gain in intrinsic value.

What is the best investment?

1. Consider buying something that can be worn most of the time (not left at home for thieves) and you may not need to pay to insure it.
2. A single diamond does not go up in value faster than say a pair or a matched set in a 3 stone ring.
3. But a single stone may be more liquid than a collection. A single stone might cost less to set.
4. “Investment diamonds must be D Flawless or VVS quality”. What rubbish! Rarer diamonds are the hardest for you to sell. Medium quality diamonds (with no visible imperfections or obvious discoloration) are more saleable, and go up in value at a proportional rate to rarer more expensive diamonds.
5. Princess cuts are hot at the moment, but in a few years they will be passé. Heart shapes, marquise and other shapes come and go in fashion. Round brilliant cut diamonds are definitely the best most resell-able in the long-term.
6. 90% of round diamonds are poorly cut. A clever buyer will buy a non-traditional ‘Ideal Cut’ diamond that will fit into the new GIA best cut standards.
7. Fancy colored pink diamonds may become rare if the Australian Argyle mine output falls as appears likely. But pinks are hard to re-sell.
8. Where do you buy diamonds as an investment at wholesale prices? Get in touch with Asset Brokers and Loans in Midland, Michigan, a fully licensed supplier of diamonds, who supplies quality diamonds of all grades, sizes and shapes, at competitive prices. Confidential viewing of diamonds can be arranged. Call Tad today at 989-631-9080