Are diamonds a good investment today and the future. Which is more valuable - diamonds or gold?

Do investing in jewellery can bring sparkling returns? Is it good to invest in diamonds?

A limited number of companies are engaged in diamond mining in the world

Diamonds are firmly associated with eternal values that can be inherited, put on for a celebration or stored in a safe in case of the onset of that "rainy day". At the same time, a quality stone can become a competent investment in a turbulent period of falling oil prices, trade wars and the general instability of the world economy.

In our time, which is not very stable from the point of view of the economy, the question of where to invest free cash sounds more and more urgently. The growing dynamics of demand for diamonds in our time is usually associated with an increase in the middle class in China and India, as well as with the high purchasing power of the generation of millenials around the world.

An important advantage of investing in diamonds is independence from currency and country risks. An asset can be purchased in one currency in one country, and in the future it can be easily moved and sold in another place and in another currency. This makes investing in diamonds a convenient tool for hedging currency and country risks.

As a rule, all information about the characteristics of a diamond can be found in the certificate, which is a kind of product passport confirming its quality. Acquiring a gem whose characteristics are not documented is very risky. An important factor in choosing a diamond for investment is, of course, its origin and authenticity.

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Are diamonds a good investment today and the future

Eternal Classics: why invest in diamonds?

The gap between supply and demand in the future can create additional pressure and lead to higher diamond prices. Production volumes, and, accordingly, diamond prices are controlled by only a few of the largest producers. Experts assume that the global supply of natural diamonds will decline over the next ten years and, against the backdrop of an increase in global demand for jewelry at least 1-2% per year, the demand for natural diamonds will only increase.

Diamonds as an asset do not have high liquidity. You need to be prepared for the fact that this is a long-term investment. The investor will have to wait about ten years before the diamond grows significantly in price and brings the expected income to the owner. On average, diamond prices rise at the level of 5-6% per year, but more rare and unusual specimens have much greater potential. For example, the yield on pink diamonds over the past ten years has exceeded 350%.

Weight is only one of the conditions for a successful diamond investment. The cost of a stone is also affected by color, clarity and cut. Depending on these characteristics, the price difference may vary within 20%. It is believed that only stones with the colors D, E, F and G are worth buying, and the purity should not be lower than VS2 (only with very small inclusions). With these parameters, the color of the diamond does not turn yellow, and the inclusions do not contain graphite. As for the form, the palm in terms of value here belongs to the traditional round cut diamond. If all its parameters are clearly observed, the play of light on the edges of the gem will be maximum.

Diamonds are generally low volatility, little dependent on macroeconomic shocks, and are a capital-intensive asset. In addition, a diamond is a kind of bearer asset; they do not have a special registration of ownership, which makes them a convenient tool for transferring wealth. Unfortunately, diamond prices are still subject to fluctuations. Pricing, first of all, depends on the main market players, which can reduce or, conversely, increase the supply of raw materials to maintain a balance of supply and demand

An investment is considered a diamond the size of one carat. At the same time, most experts are inclined to believe that it is better to choose either a larger stone (from five carats) or a stone of a rare fancy color for an investment. A diamond has four mandatory parameters that affect its value. In international terminology, they are called "4Cs" - carat weight, clarity, color, and cut. The better the ratio of parameters, the more expensive and more valuable the diamond.

The cost of each individual stone is determined individually. It is also impossible to exclude the "emotional" factor - if the buyer is determined to purchase a particular stone, he will be ready to offer him an amount many times greater than his initial estimate. Such non-linear pricing creates additional difficulties for evaluating a diamond as an investment.

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