If you were offered the opportunity to make an investment in a commodity that had never gone down in price and was becoming exponentially more valuable all the time, would you be interested?
What if you learned that current demand for this commodity was far outpacing supply and that over 90% of the production would cease by 2017 making it an almost impossible item to obtain?
The perfect storm of investment fundamentals exist in a commodity that has never suffered depreciation and is the most concentrated store of value known to man, the Natural Color Diamond. Natural Color Diamonds are the most rare, with Argyle pinks being the rarest diamond of all. Out of 160,000,000 carats of rough diamonds produced in 2009 only 30,000 were Pink. This is 0.03%. Global demand has increased as investors have begun to understand the supply side structural constraints that will limit the future production. Dramatic price increases have followed. Colored diamonds can demand up to 50 times higher prices than comparable white diamonds.
These most valuable gems will only become more rare because Rio Tinto's Argyle Mine, supplier of over 90% of the world's Pink, is scheduled for closure in 2018. Presently, no similar deposits have been discovered in the world. This is highly unlikely to happen. Even if one is discovered, it takes ten years to produce diamonds and inventories are at historically low levels. The closure of the preeminent Argyle Mine will be a singular industry development. Price appreciation will anticipate this significant looming event.
-In Hong Kong last year at Christie's a 14.23 ct pink sold for 23.1 million.
-A 0.95 Ct blue sold in NY last year for 15.7 million.
-A 5 carat pink sold in 2009 in Hong Kong for 10.8 million
-24.78 pink was bought in 2010 by Graff, a major player in the diamond investment world, for a record setting 46.1 million.
Colored diamond's are selling at public auctions for record prices with continued demand in USA and ever increasing demand from emerging markets in Asia and India. Even during this economic crisis, the prices continue to rise because the diamond is a strong hedge against crashing fiat currencies. These Diamonds command as much as 2.1 million per carat when sold on their own. They become priceless collectables and art pieces when paired with signature designs.
First of all, it's important for new diamond investors to be-aware of the difference between investing in colorless (white) diamonds and colored diamonds. Colorless (white) diamonds are typically used for engagement rings and have more or less been commoditized whereas, savvy investors understand that natural fancy colored gemstones are becoming the fastest growing hard asset investment in North America. For every 10,000 carats of colorless diamond mined, 1 carat of color is found. Only 20% of diamonds mined are considered gem worthy and out of these only a small percentage are called "eye-clean" or without visible inclusions. This leaves only a small number of gems that can be considered rare thereby providing a hard asset investment that is likely to continue to appreciate in value.
Given the current state of the global economy, investors are naturally turning to hard asset investments such as gold, silver and investment grade diamonds as a store of wealth. In hard economic times, an investor's highest priority is to protect purchasing power. In normal times, when inflation rates are stable, fiat currency is fine for protecting purchasing power. But when confidence in currency is lost, the only way to protect purchasing power is to move wealth from the medium of exchange function (fiat currency) over to the store of value function (hard assets) of money. Natural fancy colored diamonds are highly portable and can be stored in a safety deposit box or worn as jewelry. It's the only multi-million dollar investment portfolio that fits into an envelope, contains no security numbers, no names and requires no registration.
It is essential that investors understand that there is a significant difference between paying retail prices for diamonds and paying prices offered by official rare jewel investment houses. In fact, diamonds from Tiffany or Harry Winston can be marked up as high as 200% and 300% on the original price tag. Savvy investors know this. New investors need to know that there are alternatives. Rare Jewel Investment Houses offer rare gems of similar or equal quality to name brands diamonds (specifically for investment purposes) at a fraction of the price. The reason why 'Rare Jewel Houses' have emerged in recent years is to cater to investors looking to diversify their portfolio; these are 'luxury diamond consumers' who are less interested in 'brands' and more interested in buying a loose investment-quality stone poised for great appreciation. The diamond industry is inevitably going to see the prices of rare gems and natural fancy colored diamonds rise even more.
The Gemological Institute of America (GIA) developed the 4Cs as a way to objectively compare and evaluate diamonds. The four "C's" of diamond evaluation (with more emphasis on colorless (white) diamonds) are 1) Color 2) Clarity 3) Cut 4) Carat (weight). This criteria is typically use for valuing colorless (white) diamonds, whereas natural fancy colored diamonds are graded on Hue, Tone and Saturation. For a colorless (white) diamond to be considered rare, it needs to be valued at a high level in all four C's. However, many jewelers will advise clients that clarity is not as important as size depending on the purpose of the purchase. For an engagement ring, clarity is less important then weight. For investment purposes, it is not enough for the gem to be large, it must also be am exquisite Hue, Tone and Saturation. In the last 30 years, industry experts have developed cutting techniques that exemplifies a colored diamonds brilliance. Carat is less important when investing in colored diamonds.
Join an educational seminar at House of Color Diamonds at 60 READE in Tribeca, NYC. Some of our our upcoming seminars include: Why are color diamonds a good investment?, How are Natural Color Diamonds comparable to a Paintings, Classic Cars or Gold?
Kristin Hanson is NY's premiere color diamontaire. Featuring a global selection of rare diamonds carefully curated for each client. Kristin Hanson has offices in NYC and Hong Kong, diamonds are displayed exclusively by appointment.