Like the old song says, “Diamonds are a girl’s best friend.” These days, the beautiful and increasingly rare colored diamond can be an investor’s best friend, too.
Many investment counselors recommend including hard assets like diamonds in one’s portfolio.
Hard assets, which include things like oil, natural gas, gold, silver and real estate, can be an excellent inflation hedge.
Fancy colored diamonds have historically outperformed other hard asset classes. They’re recession-proof and they’re a good option for people looking for assets to hold on to for long-term growth.
Prices for the higher grade categories of colored diamonds have increased in the past 12 years, and the price for pink diamonds in the Fancy Intense color category has increased 1,000 percent for the same period.
Most people picture the traditional clear, colorless stone when they think of diamonds. But, diamonds come in a spectrum of colors — pink, blue, orange, purple, black and other shades. The colors are formed by trace chemical elements and particulates during the crystallization process: the presence of boron creates the blue diamond, while nitrogen produces orange and yellow ones.
The Argyle Diamond Mine in Western Australia is one of the world’s largest diamond producers. It’s the major source for the extremely rare and valuable pink diamond. Less than 1 percent of the Argyle diamonds are pink, making them highly desirable to collectors and diamond connoisseurs.
The Argyle supply of diamonds is being rapidly depleted and the mine is expected to cease operation in 2018. This in turn is driving global demand for colored diamonds — especially the pink diamond — and prices are expected to increase tenfold by the time the mine shuts down.
There are several key points to consider when investing in colored diamonds.
Grading A Colored Diamond
Color grading is one of the most important factors when appraising the value of a colored diamond. There are three criteria. Hue is the main color of the diamond: there are 27 hues. Tone refers to how light or dark the color is. Saturation, or strength of the color, is ranked in nine categories, from Faint to Fancy Vivid.
Physical Characteristics That Determine Value
Color diamonds are rated for clarity, which is a term that refers to the absence or presence of imperfections in the stone.
The price of a diamond is proportional to its carat weight.
The cut of a colored diamond isn’t a factor in pricing, but it does have an effect on color and carat weight. For example, the radiant cut produces a more even distribution of color.
Growing Your Investment’s Value
Setting an investment diamond into jewelry can increase its value. Higher demand for jewelry pieces drives up the resale price.
Although no two diamonds are alike, two that appear to be very similar can be sold as a pair at a higher value.
Authenticating Your Investment’s Grading
When buying a colored diamond, make sure that it has a grading report certificate from a reputable gemological organization.