Investment in diamonds can be very lucrative and, since the gold value has lost its appeal (a plunge of about 30% since 2011), diamonds are attracting wealthy investors, making new waves as hard assets. As a diamond investor, it is imperative to do intense research before purchasing these gems as the investment should meet at least the following requirements, viz, price transparency and transaction costs, resale liquidity and certification of quality assurance from an independent grading third party. Guidance from a trusted dealer with expert knowledge of international prices and access to highly complex markets, and with whom you have established a working relationship, is of paramount importance. Each of these requirements will affect a purchase.
There is no universal world price per gram for diamonds. Diamonds are expensive gemstones, each stone is unique, and the assessed value is complicated, therefore it is important to investigate the price difference between buying and selling prices for investment diamonds, especially the price you would receive if selling on the same day as buying. Prices will vary depending on the Four Cs, namely cut, color, clarity and carat weight. The price is determined by Tavernier’s or Indian Law and increases with the stone’s size. Transaction costs vary from 2–5% depending on the size of the investment. Large stones are rare and very expensive, and those that are over 25 carats in weight are usually given a specific name! Similarly expensive are rare colored stones and as an investor it is wise not to buy spectacular diamonds, the reason being that they are thinly traded and may be difficult to resell. When an investor understands this market fully, only then does the purchase of rare diamonds become feasible.
There are various price guides to which a buyer can refer such as the Rapaport Diamond Report, the Try Diamond Report and the Gem Guide to name a few. The guides focus on research and education making these accessible to the public. Since the De Beers cartel was dissolved in 2001, many diamonds are now sold on auctions and in open markets. Commodity-like pricing is difficult because of the many variables amongst diamonds. A positive attribute of diamond investments with their high carat weight value is that they are easy to store and to transport. On a lighter note, diamond heists demonstrate how easy they are to transport!
The principles of investing in diamonds are dictated by supply and demand, as well as having an ‘early hand’. There is a mark-up price each time a diamond changes hands – an example is buying directly from a polisher in which case this would be ‘first hand’. For investors it is wise to know who is an early hand trader.
As a ‘beginner investor’ the best diamonds to buy are standardised Round cut stones varying in weight from 1.01 to 1.49 carats, D-H in color, IF- VS₂ in clarity, and excellent to very good in cut. These specifications offer the best value for buying and selling. Smaller stones from 0.5 to 1.0 carats, and larger ones up to five carats, can also be considered depending on the quality and grading.
It is imperative that investment diamonds are certified by a genuine grading organisation such the GIA (Gemological Institute of America). Other excellent laboratories are IGI (International Gemological Institute), EGL (European Gemological Laboratory), AGS (American Gem Society) and RGI (Royal Gemological Institute). These laboratories are able to identify whether a diamond is natural or synthetic, also known as ‘laboratory grown’.
It is also possible to invest in diamonds via diamond funds on the stock exchange. This eradicates the necessity for the investor to have actual knowledge of diamond buying.
With regard to investing in rare colored diamonds, the value of large colored diamonds continues to appreciate dramatically. The demand is high, as is the price for an investor!
One of the world’s most expensive diamonds, the Graff Pink, a 24.78 carat Fancy Intense Pink was sold for $46.2 million in November 2010.
The second most expensive Fancy Intense Pink diamond was sold in April 2013 – the Princie Diamond, a 34.65 carat stone, for $39 million (shown below on the left).