Invest in Diamonds - Diamonds for Investment

The recent turmoil in financial markets triggered by the Standard & Poor’s downgrade of the U.S. credit rating had many people drawing parallels to the collapse in financial and commodity markets in 2008. Once again, fear permeated as reality hit home that perhaps the empire has no clothes and the repercussions for the rest of the world would be horrendous.

However, there was at least one visible ray of light during the recent upheaval - gold powered to record highs above USD1,800 per troy ounce. The Swiss franc, ostensibly a gold-backed currency also found strong support as a safe haven currency.

This was in stark contrast to what occurred in 2008 when the Global Financial Crisis forced wholesale liquidation across all asset classes. Funds and the public at large have had three long years to assess and reassess the world financial situation and realign their portfolios accordingly. Hence, the recent falls have not been as pronounced as in 2008 and some asset classes actually rose.

 Argyle Pink diamonds

Argyle Pink Diamonds

Fancy color diamonds is an asset class not usually mentioned on CNBC or in the mainstream financial media, however, perhaps it should be.

Having displayed steadily appreciating prices over a period of decades (prices appreciated approximately 2000% over the period 1977-2007), fancy color diamonds exhibit investment characteristics that few other investments can match.

In fact, since 2002, the entire spectrum of fancy colored diamonds has seen annual price increases from 10% to 35%. With supply limited and the Chinese, Indian, Russian, and Latin America  markets beginning to enter the fray, the appreciating price trend for fancy color diamonds seems to be assured. 

 Yellow diamonds

Yellow Diamonds

As the U.S. has printed trillions of dollars to stimulate their economy, it has created cash outflows from the U.S. dollar into numerous hard asset classes – assets which cannot be created by a printing press or the tap of a keyboard. Fancy color diamonds certainly meet these criteria.

They are the rarest of diamonds, comprising 1 in 10,000 diamonds, with differing colors commanding astounding prices depending on their varying rarity. Notwithstanding that prices of fancy color diamonds are not quoted like those for gold or silver, fancy color diamonds are a safe-haven asset and this fact is becoming apparent to more people.

When the price of gold fell 30% in 2008, diamond prices generally fell less than 20% with rare diamond prices falling less than 10%, if at all – an exemplary performance according to any benchmark investment criteria.

 Red Diamonds

Red Diamonds

This outperformance is finally beginning to garner attention. The advent of a series of closed-end funds targeting the rare diamond market is a sign that broad-based acceptance of fancy color diamonds has begun. And, as a general rule, once a new financial concept takes root, there are usually many imitators waiting to enter the space. The Diamond Circle Capital Plc of the UK may have delayed its plans last year to raise approximately USD400 million for the world’s first publicly traded diamond fund, however it only takes one success to attract competitors.

Although pundits may claim that ascertaining the value of the assets in a fancy color diamond fund is a very subjective task, the market is deep, with the global retail diamond market expected to reach $90 billion in 2015.

Fancy color diamonds demonstrate unique characteristics. They are affordable, durable and easy to conceal, transportable, not subject to cartel control, have shown long-term price growth, are an unregistered asset class and consequently are a highly private asset, have well established valuation methods, and can be appreciated and utilized on a daily basis.

The world is in the midst of unprecedented economic and social upheaval which is neither geographically isolated nor transient in nature. As governments around the world display fiscal irresponsibility, they will do what they have always done throughout history – tax the populace and confiscate assets to cover their incompetence. Take your future in your own hands; maintain your wealth, grow your wealth. Fancy color diamonds afford you the means of doing this as well as the many other advantages exclusive to this asset class.

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