Pink, Red Yellow and blue – colored diamond prices keep rising
The colored diamond sector is the most spectacular part of the diamond industry since they are less than 1 percent of the entire diamond market which is largely comprised of regular, white, diamonds. And that is one of the main reasons for the continuous rise in the price of colored diamonds, thus making them an excellent investment opportunity.
Over the past 40 years, wholesale prices of fancy color diamonds have never decreased. Certain color classes, like reds, blues and pinks, have seen annualized returns in the double and triple digits during this time. Investment grade blue and pink diamonds have seen their price per carat leap 40-fold over the past four decades. As an asset class, fancy color diamonds have seen clear long-term appreciation.
Supply is falling while demand is rising
According to industry estimates, there is one carat of colored diamonds for every 100,000 carats of white stones. And if that was not enough to make colored diamond prices continuously soar higher, supply is falling while demand, particularly from collectors and investors, is rising.
Given that colored diamonds are so much rarer than white diamonds, they naturally cost more than their transparent counterparts. That also means that factors affecting diamond prices and sales are different than those for the white diamond market.
Indeed, the colored diamond market is such a nice sector that the number of specialists is very small. There are very few people in Israel who have deep experience in colored diamonds. And there are very few polishers who have the experience to work with such diamonds.”
The Cullinan mine in South Africa is the best-known source of blue stones, while rare pink diamonds most usually come from the Rio Tinto Argyle operation in Western Australia. However, neither of these mines is getting any younger, and the supply of rare diamonds is declining – thus making them even more attractive as an investment.
A few years ago British jewelry dealer Laurence Graff paid a record-breaking $46 million for a 24.78-carat fancy intense pink diamond at an auction in Geneva. As if to illustrate the extraordinary and unpredictable demand for such colored stones, the sale price was well beyond pre-sale expectations of around $1 million per carat. As a world-renowned diamond and jewelry expert, it can be assumed that Graff paid the huge price believing prices will rise higher.
“What makes colored diamonds so popular and leads people to pay such high prices for them?” asks a diamond dealer. “Perhaps the most important is that, unlike transparent diamonds, color gives warmth and character. It makes the gem even more irresistible. In addition to that, as with precious gemstones, jewelry set with colored stones can be more effectively worn in a fashion sense. The right color of clothing can be set effectively with colored diamonds.”
Colored diamonds as an investment opportunity
Colored diamonds as an investment opportunity is clear against the background of a supply shortage in the coming years due to rising demand from China and the Far East. Collectors and investors are looking at white diamonds as an investment for the future due to the shortfall that we know is coming, which means that colored diamonds are an even clearer investment prospect given their extraordinary rarity.
Pink diamonds, since being launched onto the jewelry industry more than 30 years ago, have seen their value almost double every five years. High-profile purchases by celebrities of such diamonds has boosted demand further. These include the purchase by actor Ben Affleck in 2003 of a six-carat pink diamond ring worth a reported $1.2 million which he gave to then-fiancée Jennifer Lopez.
10 Carat yellow diamondFootballer David Beckham reportedly bought his wife Victoria a $1.8 million, 10-carat pink diamond. And American basketball star Kobe Bryant bought her an eight-carat purple diamond ring worth around $4 million. However, demand for pinks, in what might be described as the non-celebrity market, is generally in the range of 1 to 2 carats, while the deeper the saturation of color the higher the cost.
If pink diamonds are rare, then blue, orange, green and red diamonds define an even greater degree of rarity, and thus have never seen a fall in value. Indeed, many of them have been sold a number of times, setting new records with every transaction.
As with Graff’s purchase of the Graff Pink diamond, and the record prices regularly being recorded at major auctions by Sotheby’s, Christie’s, and other auctioneers in the past two years, there does not appear to be a pricelist to work from.
A long-term investment
Colored diamonds are bought as a long-term investment, meaning they are kept out of the market for lengthy periods. That in itself makes them even rarer, ensuring that the diamonds, when they are put up for sale – sometimes only once in 20 years – will command extraordinarily high prices. “We are talking about portable, wearable, fashionable, high-profile forms of wealth,” said a dealer. “It’s not like gold or cash that is under lock and key in a bank vault – although many diamonds are similarly locked away – they are worn for pleasure as well as being an investment.”
The huge amounts paid for colored diamonds also points to another reason for their meteoric rise in price. Despite the advertising and promotional work done by diamond producers and other elements of the pipeline over the years to counter the claims by some that diamonds are a commodity, there is nonetheless a feeling that white diamonds are very similar and a mass market exists for them, said a dealer.
“You can buy a diamond ring or bracelet or necklace just about anywhere in the world where the diamond cuts are similar and the diamonds look alike. Compare that with colored diamonds which are so very rare. There is no way you could class them as a category. Bear in mind that the wealthy always want something that others do not have, and rare colored diamonds fit the bill.
“There are diamantaires who have gone into the niche market for colored diamonds because they see that they are able to distinguish their goods from the rest of the market. That makes good business sense, although it also means you have to have an exceptional understanding of the market. They can also offer items that fit in with a trend of recent years among consumers, along with the movement for environmentally conscious and fair trade goods, to acquire “natural” goods. “What can be more ‘natural’ than a colored diamond? A certain color diamond can fit in with consumers’ personal favorites and play to their emotions.”