Why you should be investing in diamonds right now
Forget oil stocks and property shares, read this expert’s advice on why you should buy diamonds.April 13, 2015
The world of diamonds is changing. No longer are these precious stones only to be found around the necks of the rich and famous or the subject of Shirley Bassey songs. Today, diamonds represent a viable investment opportunity for many, promising real returns and value.
From 1999 to 2011, the price of three-carat diamonds increased by 145 per cent, whilst five carat diamonds rose by 171 per cent, as measured by the Rapaport Diamond Trade Index. Coloured diamonds represent a similar story, increasing in value by an astonishing 167 per cent from 2005 to 2014.
Like any investment however diamonds cannot be simply assumed as a safe bet. It’s an unregulated trading market that is often hard to crack. For example, the price of cut diamonds is almost entirely controlled by consumer demand, which can change rapidly and is heavily influenced by trends and competition from other luxury categories.
So for those of you still keen to take the plunge and put your hard earned dirhams into diamonds, what should you look out for? It’s important to always start with the four Cs: clarity, colour, carat and cut. This is how the value of any diamond is calculated and the most valuable diamonds will have the best of all four measurements.
Clarity is the term used to describe the size and number of inclusions in a diamond. Inclusions are minute traces of non-crystallised carbon, the element from which diamonds are born and act as nature’s figure print, making every diamond unique. Unfortunately larger inclusions will affect the way light is dispersed through the diamond, impacting the stone’s brilliance and ultimately value. With this in mind, it’s important to view any stone under a Loupe x10 magnifying lens (available for roughly AED 60) before purchasing to ensure any inclusions are spotted.
You’ll also need a Loupex10 to ascertain the exact colour of a diamond. Whilst most appear to be white or colourless, the majority of diamonds actually have subtle yellow or brown tones. These colours diminish a diamond’s value and it’s therefore best to buy a diamond with the least possible colour. Of course there are exceptions to this rule; diamonds coloured pink, green, blue and red are all incredibly rare and highly valued. A diamond’s carat is an altogether simpler figure to calculate, it’s just a measure of its weight. One carat is divided into 100 "points" so that a diamond of 25 points is described as a quarter of a carat or 0.25 carats. The larger the diamond (and therefore the rarer) the more expensive per carat it will be.
Whilst the factors above are determined by nature, a diamond’s cut is dictated by the master craftsman and key in releasing the stone’s full beauty. The cut of a diamond is what gives a stone its sparkle, as the cutter attempts to allow the maximum amount of light to enter and reflect back out of the diamond. I would always recommend choosing a diamond on its brightness, as this will last with it forever and heavily dictate’s its value.
As well as the 4Cs, you’ll need to ensure any stone you purchase comes with the appropriate authentication certificate and that the stone’s laser inscription matches the certificate number. I would also recommend going to a trusted wholesaler, rather than a retailer, to ensure the best possible value. It’s also well worth checking the Rapaport Report, the jewellery industry’s standard for the pricing of diamonds, before making a purchase. All of the above is also true when investing in coloured stones, however you will definitely need a few more dirhams to enter into this market. In November 2014, the “Pink Star” a flawless pink diamond the size of a plum, sold for $83.02 million in Geneva, a world record price for a gemstone at auction. This area has also seen some of the most dramatic increases in value. For example, 20 years ago a one carat Fancy Intense Pink Argyle Diamond would have sold for approximately $70,000.00 per carat but today that same diamond would be worth $500,000.00.
With all this in mind there is a lot to think about when investing in diamonds. But with market sentiments as strong as ever, fuelled by increased demand amongst the Chinese for engagement rings and the United States’ continued economic recovery, there has never been a better time to put your money in these precious stones as diamonds continue to prove they are not only a girl’s best friend.
Alon Garty is founder of Van Eyck Jewellery. Visit vaneyck-jewelry.com