Colored Diamonds Offer Safe Appreciation During Volatility

Colored diamond is treasured by most collectors where the pink, blue, green and yellow have been attracting rich investors since past centuries. Markets are set to grow for precious rare gemstones against the backdrop of global market volatility and risks of slowdown. The Vice President at world’s largest mining company Alrosa, Yuri Okoyemov, claimed the price of such stones appreciated against the backdrop of economic instability. The mining firm auctions its produce twice a year, and in September, the auction gained around $9 million through the sale of colored gemstones. 

Comparing Blue and Pink 

The latest reports by Knight Frank on collectibles found growth in jewelry by 70 per cent in 10 years, and on an average, such investment gets over 12 per cent of growth per annum. In Q3 2018, in the last phase of the year, the profits on fancy stones grew 0.4 per cent from 2017, as per Israel-based diamond information provider Fancy Color Research Foundation.  

The highest growth on all stones was   provided by blue colored pieces, which grew at the rate of 8.5 per cent, in the same time. 

Pink diamonds got peak rates in the year. The auction of rare rectangular pink diamond of 18.96-carat  fetched around US$50.4 million at the Christie auctions in Geneva, and per carat rate for pink stones set a new record at US$2.6 million.

Transparency and Investment 

In first week of January 2019, Tiffany & Co. announced it will start sharing the provenance of newly sourced registered diamonds with customers to promote transparency in the trade. The information will contain the geographical sourcing information of each individually registered stone and it will also provide certificates, where the specifications, will be clearly mentioned. These new developments will be available to customers in first quarter of 2019, and in 2020, the company is expecting to initiate the craftsmanship service, where it will provide services such as cutting and polishing of gems. 

Is it a Safe Alternative Asset Class?

During the current economic volatility, such stones can be safe, but it requires decent cost of entry, especially, to own the investment grade pieces as some of these are over 10 thousands of dollars and there are many bars against retail sales of such items. 

These stones are mostly auctioned and pricing varies from one seller to other. 

The uniqueness, grading and various specifications (or historical values) attached to the piece can increase its value but still liquidity is low in the gem markets and unpredictability prevails.  

Supply and production of such rare stones remains flat and there are predictions that the supply will continue to decrease by 1 to 2 per cent till 2030, and this can lead to higher rates on previously existing gemstones in market. 

Like many other expensive assets, it is difficult and risky to transport it from one place to other. Further, local security laws can prevent transportation.

Investors need to think about the entry cost, pricing scheme and also changeability related to such asset classes.  

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