For a more complete and comprehensive understanding of the diamond industry, it is now important to have a look at where the fancy color diamond market is now, and where it will be in a few years. For those interested in taking part in the exciting world of diamond investing, a commitment to preparation and education will help you reap maximum benefits.
This section will discuss where we are in terms of diamond value and popularity today and how we think the demand will change in the coming years. Armed with this information, you can confidently make the most crucial decision of your investment: when to cash it in!
Current Market State for Diamonds
When is the right time to invest in rare colored diamonds? The simple answer is now. There are two reasons for this. First, the price of these diamonds has been increasing for many years, with a particularly large jump in the past decade; the expectation is that prices will continue to increase as the supply of diamonds diminishes and demand grows. Second, with diversification an important component of every investment strategy, diamond investing is the perfect hard asset in today’s troubled marketplace.
Of course, like any asset, rare colored diamonds are subject to the fluctuations of the international market. As such, it is impossible to predict their future value with certainty. However, given the huge rate of current appreciation, their increasing rarity, and the new demand from the world’s emerging centers of wealth, the future is bright for colored diamonds as an investment asset.
Some of the statistics of recent increases in the price of fancy diamonds are simply staggering. According to Asteria, in the years 2003-2011, the price of fancy pink colored diamonds increased by 543%, while the price of fancy blue colored diamonds in the same period increased by 288%. That is more than the Dow Jones, the Hang Seng, or more traditional colorless diamonds. In fact, on a price per carat basis, rare colored diamonds are the most valuable gemstones on the planet!
Rare colored diamonds broke the record for the highest price per carat paid at auction on four separate occasions in just over two years, between October 2007 and December 2009. The two most expensive diamonds ever sold at auction are both fancy rare colored diamonds.
This phenomenal rate of increase is not predicted to stop any time soon as the Argyle mining plant winds down its mining activity, which is expected to end in 2020. With the quality of the diamonds being produced at Argyle steadily worsening and no new mines being discovered, the market is adjusting to the coming drop in supply.
Along with this, the interest in colored diamonds is increasing rapidly as people realize they must acquire the stones before Argyle finally shuts down production. A growing number of wealthy individuals in emerging markets such as India, China, Russia, and Latin America, and the many high-profile investors already investing in diamonds, are acting to raise demand. Compared to colorless diamonds and gold, whose value dropped in recent economic times, colored diamonds continued to appreciate. This steady history of price appreciation, reaching back to 1970 when record-keeping began for colored diamonds, also refutes the argument that rare colored diamonds could be just a flash in the pan.
Rare colored diamonds are a sound investment today due to their resistance to the volatility of the current economic climate. During economically unstable times, investors look to move their capital into hard assets such as gold, rare art, antiquities, and diamonds to maintain value with a view to translating them back into cash when the economic situation has improved.
Rare colored diamonds are the most popular recent trend in hard asset investing and are increasingly being seen as an essential aspect of portfolio diversification due to their rising value and impressive history.
As Harold Siegel, CEO of H. Seigel Fine Auctions and Rare Colored Diamonds (RCD), a financial investment expert with over 35 years’ experience, stated in May of 2013, “By investing in rare colored diamonds investors have access to alternative investment vehicle with a well-established and successful track record of doubling their value every four to five years.”
Aside from that, investing in rare colored diamonds makes very practical sense for a number of reasons. They are the highest concentrated stores of wealth on the planet, small, light-weight and far more easily transported, stored and protected than, for example, gold of the same value. There is also no obligation to register ownership of rare colored diamonds in most countries, which means you can keep your investment a private matter. Additionally, they can be sold for any currency in any country, and possess a remarkable natural beauty that can serve a functional role as a collector’s item or as a piece of jewelry.
The Future Outlook for Rare Colored Diamonds
Despite the inconsistencies of the world economy, the diamond market still remains a lucrative business venture. It continues to provide a good opportunity for buyers to purchase valuable jewelry pieces and resell them later at a price higher than their initial purchase price. Such buying and reselling has taken place in the market since time immemorial and will continue to be one of the driving forces in the jewelry industry, supporting the market’s continuous growth.
With exquisite pieces of jewelry, there is always a buyer. Jewelry has proved to be a worthwhile investment that rarely depreciates, and sophisticated diamonds never go out of style. Quality gemstones and precious metals coupled with exemplary workmanship will always have a market.
For owners of large collections, especially of truly one-of-a-kind pieces, negotiations sometimes happen fster than expected as buyers rush in and make their bids. Private owners will be dealing with several collectors looking to buy out a large collection, which may also offer a potentially great opportunity for those who can afford it.
Letting Go: The Art of Buying Out
There are several timing factors to consider when thinking about selling your investments. These depend entirely on your strategy and goals. Many other factors can come into play though, when you take different tastes and market variables into consideration. The general rule is to remain patient, especially during negotiation and organization of auctions or sales.
A common strategy for people who want a fast return is to sell now, years away from the potential exhaustion rate. People will clamor for an early sale rather than waiting for inflation and an increase in demand to further increase prices. Using this technique, you will almost always find a buyer immediately, but in doing so you sacrifice a potentially larger return later on. This tactic is better used for sizeable quantities of diamonds.
The more accepted game plan is to cash in when the demand is at its peak; in this case, the year 2020 looks promising as that is when Argyle exhausts itself. Prices could be at their highest in accordance with demand, but you will have some competition when looking for a buyer. Some analysts say it is best to capitalize at a key point instead of letting the demand die down, once the initial peak market activity begins to return to normal.
Overall, the future of colored diamonds is exciting, with money to be made by investors and collectors alike. As with all important investment decisions, it is a good idea to be knowledgeable and to speak with those in the industry. Experts offering professional counsel are available and are a good first stop for those thinking about investing – or divesting!