Gold and Silver have been hot investments on and off for years, and both metals fit in with collectibles as a store of value. Bitcoin, cryptocurrencies and now non-fungible tokens also fit into the realm of collectibles and investments. But what about investing in diamonds alongside other collectibles?
Collectors Dashboard has monitored that diamond prices and jewelry prices have generally risen over time. There are short-term factors beyond economic conditions that play a role in whether or not a diamond should be considered solely for investing purposes. There are large price mark-ups that occur at each and every step between a diamond being sent out of a factory and ultimately being sold to by a retailer. There are cutters, designers and manufacturers, and there are distributors along the way. None of those services are free. Nor are those services cheap.
The diamond trade itself can be a very profitable and lucrative business. Investing in diamonds by the public is not as simple as just buying and selling for a profit. Buying a piece of fine diamond jewelry from a retailer in hopes of turning around and selling it back to the jewelry industry or to another buyer for a profit in the short-run is likely to be a painful investing experience for most people who are investors and collectors.
Some people will still consider their fine jewelry an investment over time. That’s understandable considering that it is easy to spend $10,000 or $50,000 or even well above $100,000 on a single piece of jewelry — or even on a single stone. While these large purchases may not be sold at a high profit immediately, they are of course considered a store of value. It has also generally been the case that diamonds and pieces of jewelry will sell for much higher prices over the course of time.
The image of a bag of diamonds may seem enticing as a real investment. Diamonds, similar to other items with collectibles or investments, are subject to standardized grading. Each sub-grade of cut, carat, color and clarity will impact a diamond’s value. Any diamond buyer or investor needs to be very well educated on these grading metrics when it comes to knowing 1) what they are buying and 2) what price they are paying.
In an age where terms like conflict diamonds would seem to be a vocal deterrent of building a diamond collection, many websites and services have made very strong efforts to make diamond purchases easier and more transparent.
The website BlueNile.com offers necessary disclaimers that its loose diamonds for sale are indeed conflict-free. This is something that should be said beyond personal feelings on the subject. After all, there are international repercussions of trading in conflict diamonds and it could make an investor lose their entire investment in litigation costs alone.
BlueNile’s diamonds are protected by the Kimberly Process, a modern day system of tracking the sourced diamonds from mine to market in partnership with the United Nations. U.S. customs actively enforces this process on all diamonds entering American ports. The #1 selling loose diamond is a round cut diamond that lists 1.00 carat for $3,760. Fractions of a carat are also offered for sale for lesser amounts. A slight change to that cut with a 0.05 carat addition and the diamond lists for $7,041. But forget the $100,000 or more mentioned above for a single stone because the site also recently had two diamonds listed at $2.6 million and $2.7 million, respectively.
According to WithClarity.com, the most expensive cut is the round brilliant variety. This diamond style is deemed to be the one most associated with engagement rings, although there are no absolutes in that statement. Buying diamonds cut into other shapes or designs can save you money. Other cuts may also cost more and any variations can all impact the price of an investment.
Antique diamonds are generally associated with the jewelry they exist in. Removing the diamonds can affect the value and in many cases the provenance of the company or jeweler who made it. Antique diamonds are sometimes referred to in the industry as old-miners, made in the late 1800s or early 1900s and lost to time or destroyed by modern jewelers according to EstateDiamondJewelry.com. The cut is 10% to 15% less expensive than old European cuts on a retail market according to the Diamonds.pro website.
One staple in the diamond industry is the Rapaport Price List as a primary source of diamond prices. Rapaport provides independent benchmark asking prices which are used throughout the global diamond trade. While diamonds can greatly differ in qualities, the service aims to standardize and compare diamond prices with transparency and fair market prices.
Rapaport also offers RapNet as the largest online diamond market for diamonds. It boasts 1.5 million diamonds listed daily, with a combined price of $7.4 Billion. RapNet also represents 140,000 daily searches from members in over 92 countries and is considered the primary platform for businesses involved in trading diamonds.
The website PetraGems.com represented in February of 2021 that the price of diamonds have risen on average by 32% to 33% over the last 10 years. Still, the site also warns almost immediately that a buyer will most probably make a misinformed decision. This should indicate immediately that there is no such thing as a free lunch nor any guarantees of a profit.
Investing money into any asset class comes with risks and can generate large losses. That is true for stocks, bonds and real estate — and it is very true for diamonds. If there was one magical formula for investing in diamonds, it would seem to be that the longer a diamond is owned the more it is worth over time.
Categories: Watches & Jewelry