As the 2020’s progress and global social and economic upheavals start to look very much like the norm, investors are increasingly focusing on ‘tangibles’ to help leverage fiscal security.
Perhaps gold ingots might come to mind for some of us when thinking tangibles, but specific diamond types far outshine gold – and pretty much all other tangibles – as far as representing stability and dependable value growth in changing market conditions. And if, like most people, you immediately think of white or colourless diamonds, you might be surprised to learn that the smart money lies with coloured diamonds.
If you’ve never delved deeply into the world of diamonds and, specifically, diamond investing, you might be surprised to learn that the precious stones are available in many hues beyond the familiar colourless variety. What’s more, fancy coloured diamonds tend to be worth far more than colourless stones, simply because coloured diamonds are much rarer. In fact, of all diamonds mined throughout the world each year, coloured diamonds represent a mere 1% or so. That rarity both builds demand and assures ongoing value. Fancy coloured diamonds haven’t exhibited any depreciation of note in over 4 decades. The same can’t be said for assets such as gold or stocks.
Most of us are aware that diamonds were formed millions or even billions of years ago deep below the earth’s surface in a process involving intense heat and pressure. They’re made almost entirely of carbon atoms. But there are variations in the recipe that lead to coloured diamonds being formed, rather than the more common colourless type. Blue diamonds, for instance, are the result of a small amount of boron in the mix. Yellow diamonds form when nitrogen is found within the crystal lattice. Green diamonds are caused by the gem’s exposure to natural radiation. Perhaps fittingly, although scientists understand that very rare pink diamonds don’t actually begin their lives pink, there is still debate about what causes them to take on this special hue. Current theory has it that their shade comes as a result of the ‘plastic deformation’ that occurs as a result of extreme natural stresses even beyond those that form colourless diamonds. While the process that forms pink diamonds is not clearly understood, what is clearly acknowledged is that their rarity makes them the most valuable of all the fancy coloured diamonds.
No truer words have been spoken than ‘diamonds are forever’. In common with all diamonds, pink diamonds don’t physically diminish at all as the years go by, making them an asset that can be passed on from one generation to the next. Pink diamonds are an incredibly dense concentration of wealth in one tiny asset that is portable, relatively easy to store and insure. These qualities compare very favourably to assets such as real estate or, say, antiques. While pink diamonds are sometimes associated with only upper-echelon investors, entry-level stones are available that fall well within the reach of many privateers putting together a superannuation portfolio. In Australia, pink diamonds are an asset permitted as part of a Self-Managed Superannuation Fund.
The prevalence of more common investments – gold, stocks, real estate – means that whole industries have long been established to assist investors wishing to add these assets to their portfolio. coloured diamonds and in particular pink diamonds, by comparison, are traded globally amongst a relative handful of qualified and experiences gemologist experts. When considering pink diamonds as an asset, factors quickly come in to play that greatly affect value, yet are well outside the skill set of all but a few to assess. The world market for pink diamonds is finite yet complex. Grading comes in to play when assessing the value of a stone, but many other considerations must be made, including comparison to tender diamonds, as well as the provenance, authenticity and traceability of the stone or stones in question. A complete chain of governance is the ultimate assurance of a pink diamond’s authenticity, and tracing this calls for both expertise and industry connections.