WHAT'S IN A DIAMOND?

I recently read an article titled “Diamonds Are A Sham And It’s Time We Stop Getting Engaged With Them”. You can’t imagine my shock and anger when I read that piece. I agree with the comment of one of the readers; he/she said “this is like the guys who say valentines are a sham as an excuse to not be nice to their lady on the day”. In summary, the entire article tried to portray how buying or “investing” in diamonds is bad business and has no intrinsic value. Some valid points were made regarding this topic and some had no head at all.

Here is a link to the article,http://au.businessinsider.com/why-diamonds-are-a-sham-2013-3 read and let us know what you think. But these are my responses as to why I don’t agree with that write up;

First of all, let me quote Warren Buffet”I’ve never regretted buying diamonds” and he added “they are a good investment!”  (http://borsheimsbrk.com/tag/salesman/page/3).

1. Pricing and Market: When it comes down to diamonds, there are two major factors that affects its price one of which is common to a lot of people the 4C’s – Color, Carat, Cut and Clarity; but people forget to consider the supply of diamonds as another major factor. The article also indicated on how there are irregularities in the market for diamonds due to the mining monopoly by De Beers. This is not entirely true. Agreed De Beers owned a huge share of the market, and there is no market floor to trade for diamonds per gram unlike other precious metals like gold. However, the industry has opened up so much more since the 1870’s and there are more industry players now. Also the industry makes use of price guides from Rapaport Diamond Report, PriceScope, Ajediam Antwerp Diamonds Monthlyand The Gem Guide, which are published weekly, monthly or quarterly and can be accessed online by any individual. Also I would like to bring to your attention that, “on August 7, 2012, the USPTOgranted a patent on a process that classifies Investment Grade Diamonds for commercial trading and financial investments,the precursor for diamonds being a publicly traded asset class. As a result, a Physically Backed Diamond ETF is currently under US Securities and Exchange CommissionRegistration and is anticipated to be available on the NASDAQ Stock Market by 2014.” – Wikipedia. ((Take a cue guys. If I were you, I would start thinking of how invest against next year)).
2. Certified All The Way: I always tell my clients this; whenever you are purchasing diamond jewelry, make sure to get certified diamond jewelry. And not just certified by any institution but by GIA or IGI. GIA preferably (Gemological Institute of America). Why you may ask! You need that from an investment stand point. Certified diamonds have more credibility when presented to a manufacturer for “recycle” or resale. A GIA certified diamond clearly states its 4C’s, if it’s a lab generated or natural diamond, treated or non-treated etc. All these properties are very important to be known by the buyer before purchase as they affect the price of the diamond. With a certification you know the value of what you have in terms of properties. Because the cuts, polishing and processing of a diamond can raise its price without raising its value. Also it should be noted that about 90% of all purchased diamonds are not certified. It’s important you request for certification no matter how much you spend on them ($300, $100, $50,000 whatever).
3. The Law of Supply and Demand: Let me not bore you with economics, I’m sure we all know what the law is. The demand for diamonds keeps increasing at a rate of 7% every year. But its supply isn’t growing as fast, 5% per year. So obviously, we can tell how that would affect the prices of diamonds. For a new diamond mine to get into full operation and production mode it would take approximately between 7 to 8 years from the date of its actual discovery. The Argyle mine in Australia produces over 90% of the world’s pink diamonds and currently has a life span 4 to 6years before it runs out of supply. No new discovery for this type of diamond has been found yet. Some dealers of fancy colored diamonds have claimed that they have never seen the market for colored diamonds go down in 30 years. So obviously you can tell that the prices for diamonds would continue to be in the high, increasing its investments value. Unless the laws of supply and demand are wrong.
4. Round Diamonds: Studies have shown that more people prefer to buy round brilliant cut diamonds. Why? Well the cut of a round brilliant cut is mathematically defined to produce maximum reflection and internal refraction of light. The round brilliant cut produces the greatest amount of fire, scintillation and brilliance compared to other fancy cuts, that’s why it’s more popular and wiser to invest in. Consumers understand that diamonds are the world’s hardest material, but few understand that diamonds can fracture or break. Yes they can. A fracture on a diamond can be corrected but it would automatically reduce its value. Round brilliant cuts are less likely to do this. For instance a fancy cut stone say an emerald cut, can be damaged if there’s a sharp blow to its table (the large flat facet on top) which can cause the diamond to fracture.  Also, the pointed corners of square cornered fancy cuts are more prone to damage.  On the other hand, round brilliant cuts are less likely to fracture, because of its structural design which has a specified depth below the table. Like all diamonds, its edges can chip, but it is less likely to fracture compared to some fancy cuts. So if you plan on investing, rounds are the way to go.
5. Others: Like as every other investment requires patience, so does investing in diamonds. Always note that international politics and economics always affect investments worldwide. Nevertheless, invest cautiously and be prepared to take reasonable and quick actions by watching yearly trends. Also have the guide of an accredited jewelry professional or graduate gemologist before making decisions on diamond purchase/investment.

 

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