Diamonds for Investment

Investing in diamonds in general, and in natural colored diamonds in particular, is a relatively new development. The global financial crisis of late 2008 persuaded many people – not just the very wealthy – that placing their cash in stocks and bonds could be risky. As a result, people have increasingly turned to diamonds as investment vehicles.

Why are diamonds a good investment opportunity?

Quite simply because demand for colored diamonds is far higher than supply. As with regular colorless diamonds, no new large mines have come on stream for more than decade. And with colored diamonds, the situation is even more extreme since supply is relatively tiny. As a result, existing colored diamonds are rising in value.

The number of extremely fine, intense or vivid color diamonds is very limited. The only mine that produced pure blue diamonds has become depleted. Red and green diamonds, by nature the two rarest colors, have always been highly sought-after collector’s items.

Meanwhile, Argyle, the Australian mine producing around 90% of the world’s pink diamonds, plans to end production in 2018. That is just six years away.

Prices of colored diamonds have risen continuously for more than 20 years. It is estimated that the value of pink diamonds from the Argyle mine has risen by a factor of more than 100 over the past 25 years. And Rio Tinto, which operates the Argyle mine, says that record prices were achieved for pink diamonds sold at its 2012 pink diamond tender.

Meanwhile, the price of colored diamonds sold at international auctions has gone through the roof in recent years. In December 2009, Christie’s in Hong Kong sold a five-carat vivid pink diamond for $10.7 million, securing the highest price ever for any pink diamond at auction, and, at $2.1 million per carat, the highest price per carat for any gemstone. In October 2011, Sotheby’s International sold a 6.01-carat vivid blue diamond for a record $10.1 million.