Ever since diamonds were first discovered, two and a half millenniums ago, mankind has always realized the financial potential of these amazing stones. Evidence suggests that Indian people used these diamonds to decorate their religious deities. Hence they were cherished as gemstones many years ago. In recent times, diamonds have soured in popularity, especially since the 1800s. This is thanks to the industrial revolution, which taught civilization that these beautiful stones could be mined faster, in greater numbers, and with improved cutting and polishing.However, it should be noted that diamonds are not usually used as a mainline store of value during a financial crisis. This is because diamonds have a lack of fungibility (which refers to a commodity which has individual units capable of mutual substitution) as well as a low liquidity rate. Hence it is believed that diamonds make the best investment during times of hyperinflation.
Diamond investors must also remember that only 20% of all mined diamonds are suitable for commercial use as gemstones. This means that 80% of the world’s harvested diamonds are used for industrial purposes, such as drill parts and surgical tools. You must also keep in mind that almost 50% of the market for commercial diamond gemstones is controlled by De Beers, meaning that company also sets the standard in wholesale price-which if often raises. In fact, it’s only been in recent times that De Beers control has been reduced, from 80% to 50% after other diamond producers have started mines in alternative countries like Russia, Canada and Australia.
Aside from De Beers mark ups, diamond prices will be determined by the stone’s carat, color, clarity, cut and shape. Interestingly, the diamond has no universal world price per gram, in contrast to practically all precious metals. What is the financial forecast for a diamond’s investment potential? Diamonds do not appreciate in value because of the market rate. Though they are rare compared to bort diamonds, there is no world shortage of diamond gemstones. You also have to consider the threat of synthetic diamonds, which can be created at a much lower cost, and actually look better than a real diamond.
Though some diamonds can be priced into the millions, when it comes to counting diamonds as an investment there are a few issues to consider. It’s easier to buy a diamond than it is to sell a diamond. The only ones who can easily sell a diamond are established diamond merchants. Furthermore, if you sell back a diamond to a merchant expect to only collect wholesale price, not retail price-namely, what you bought it for. You must also beware of buying from non-industry sources, for the risk of fraud as well as a general discomfort on the part of jewelers and merchants.
How about diamonds that are marketed as investment grade diamonds? These could be a feasible option, though you should ask for a written promise from the dealer stating the terms. Namely, that you can sell the diamonds back at the same price or at least near the original purchase price, and within a certain time period.
Diamonds are, as De Beers put it, forever. They are a unique gift and an earthly treasure to be appreciated. Buying a diamond for purely monetary value may not hold the same joy as buying a diamond to keep for an eternity as a family heirloom.
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