Top-of-the-range diamonds can be highly profitable for investors
Prized gemstone continues to command record prices as supply is limited and demand high
Diamonds make you feel good. They’re up there with chocolates and Champagne. Investing in diamonds has a powerful psychological edge over your tech start-up company shares or natural gas futures beause they are so desirable on such a personal level.
Is this a good basis for an investment decision?
There are diamonds, and there are diamonds. Collectable diamonds – of exceptional size, quality and sometimes colour, perhaps associated with a celebrity or historical figure – are fetching astronomical prices.
There are obvious advantages to diamonds. They are portable, durable, comparatively rare and not subject to significant public opinion shifts as so many commodities are affected today by “green” considerations. Unlike fields of grain or herds of cattle, diamonds cannot be increased by human agency unless you are talking about lab-grown ones. Diamonds are easily stored by individuals, and require no special conditions, unlike investment wines.
The supply of diamonds is a different story. Supply can be, and has been, manipulated for years. De Beers controlled the modern diamond market with 80 per cent of supply, drip-feeding to maintain high prices. The end of this monopoly 15 years ago reduced prices. Supply has also been changed as new sources have been discovered, in Canada and other parts of Africa.
Whether to add this to your portfolio is an individual choice, thinks Chin Yeow Quek, Sotheby’s deputy chairman of Asia and chairman of international jewellery in Asia. “It really depends on the investor’s personal choices, where some people veer towards liquid assets, [such as] stocks and shares; others prefer to invest in more tangible commodities such as real estate. The same goes for jewellery, where you can buy shares in diamonds, but also invest in actual, physical diamonds. Today, top diamonds tend to be seen as a class investment asset.
“Generally speaking, diamonds do not fluctuate but, as with most items of value, there will have been some ups and downs. Top diamonds over time will always have an investment return.”
The world auction record for a white diamond was set by Sotheby’s Hong Kong in October 2013, when an unmounted oval brilliant-cut diamond weighing 118.28ct sold for US$30.6 million. This diamond was D (colourless) colour, with flawless clarity and excellent polish and symmetry, and which was determined as a Type IIa diamond. “This was a perfect example of a top-quality stone in a significantly large size, achieving top record prices,” Quek says.
Arnaud Bastien, president and chief executive, Graff Diamonds Asia, says: “Quality diamonds are a commodity. They fluctuate far less than other commodities which are often widely available and subject to many economic/political uncertainties. Diamonds are rare and they offer many advantages [portability, no maintenance, resistance] and over the past decades, their value has always been growing at a fair pace.”