Volatility in financial markets and global uncertainty are forcing people to adjust their investment strategies. This explains the special interest of investors in assets tied to tangible assets. Investment quality diamonds are among them.
Readers are also asked to tell about investments in diamonds. The Ministry of Finance found out for what purpose it makes sense to buy these precious stones and what are the prospects for this type of investment.
How the price is formed?
Precious stones are minerals that have a beautiful appearance and are rare in nature. Such stones are divided into 3 orders. The most expensive, the first, are diamond, ruby, sapphire, emerald, alexandrite, noble spinel, and euclas.
The most popular gemstone is a diamond, which appears after cutting a diamond. This stone is most often chosen as an investment.
Each diamond has its own characteristics. In addition to weight, it is color, purity, shape, facet. All these factors affect the price of the stone. In special tables, all these factors are taken into account together and thus determine the estimated cost.
Also, professional participants often determine the value of stones, which analyzes market trends. In addition, there are a number of online calculators in which you can enter the parameters of the stone and it will determine its approximate price from sellers.
Now a round diamond weighing 1 carat, perfectly transparent and without impurities is approximately on the market $ 20.5-26.9 thousand for the same shape, weight and color, but with low purity (indicator 12), the approximate price will be $ 1.5-2 thousand.
Although even these figures are approximate and in each case, the price of the stone is called by the appraiser, and the position of two experts on the price of the same stone can differ up to 30%.
Not everything is simple and with a price per weight. For example, two gold bars of 100 grams cost about the same as one 200-gram. It does not work with precious stones – they can not be melted down and made smaller. Yes, a perfectly clean and transparent weighing of 2 carats will cost approximately $ 83-109 thousand, that is, 4 times more expensive than twice as small.
And the price of a stone weighing 3 carats with the same figures will reach $ 250-325 thousand. Heavier stones are already passing into the category of unique and their value reaches millions.
The most important driver of price growth is the rarity of a particular copy. Among colorless diamonds, the combination of high color and qualitative characteristics meets seldom: colors from completely to almost colorless, and qualities from ideally transparent to that containing insignificant inclusions, invisible to the naked eye.
Stones with such characteristics weighing 4 carats or more are considered the most suitable for investment purposes of colorless. They show the highest profitability in the last 15 years.
Winning, in terms of investment, are colored diamonds, or of fancy colors, as they are called by professionals. They are less common in nature than white. Good clearly expressed color has only 1 in 10 thousand, and intense color is even rarer – in one case out of 25 thousand.
Rarity determines the level and dynamics of prices: over the past 15 years, colored have risen in price by an average of 3 times. Diamonds of the most intense yellow color (fancy vivid yellow) showed a growth three times faster than yellow of less intense yellow color. The rarest champions among all were the rarest – pink. In 15 years, they have risen in price more than 4.5 times.
Prospects for rising prices
In recent years, the world has mined about 147 million carats of diamonds annually. This year, according to expert forecasts, due to quarantine restrictions, world production will fall to 120 million carats.
However, diamonds in Western culture remain a symbol of love: about 80% of brides in developed countries receive rings with this stone. The new generation is often in no hurry to get married. But analysts at one of the largest diamond mining companies, De Beers, say that in parallel with the decline in the segment of wedding rings, sales of jewelry, which give to express feelings, are growing.
Another giant of the diamond industry is also seeing a growing trend in diamond jewelry. According to the company, world sales of diamond jewelry in 2007 amounted to about $ 65 billion, and in 2019 reached $ 80 billion. Further growth in the price is due to the spread of sales in Asian markets. Because that’s where the number of consumers who can regularly buy premium goods will grow.
Instead, the development of one of the world’s largest Argyle deposits in Australia, which previously provided up to 10% of the world’s diamond production, will be completed by the end of this year.
Professionals believe in pink diamonds because they are less common. This will be especially felt after the closure of the Argyle field, which is managed by Rio Tinto, due to the depletion of reserves. More than 90% of the world’s pink diamonds are found in the Argyle deposit. So they will become a real rarity. In recent years, investors from around the world have begun to pay attention to this. Therefore, price increases can be considered inevitable.
The probability of a sharp drop in the price due to economic difficulties is low. The market for these gems reaches only $ 10 billion a year. For comparison – the financial assets market is $ 100 trillion.
The small volume allows the industry to protect itself from price fluctuations – if necessary, manufacturers can keep it in storage. Therefore, at the beginning of the year, during the lockdown, prices, although asked for approximately 7%, but the decline was much smaller than for other goods. Oil fell three times at the same time.
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