Diamond Market background

However, diamonds come in many forms, and whilst all diamonds are being seen as a solid alternative investment it is the coloured diamonds, most notable the pink diamonds which are now being seen as the stand out investment opportunity. As will be discussed within this report the outlook for the market for diamonds as an investment is positive, but within that the demand seen for pink diamonds is particularly notable. In recent years there has been a huge interest in these diamonds and some notable sales at auction have grabbed the headlines, not to mention the attention of investors around the world. The mine is the world’s largest supplier of natural coloured diamonds producing over 90% of the highest quality pink diamonds.

Diamonds as alternative investment

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The diamond industry has enjoyed a remarkable run of success since the mid-twentieth century, compiling a record of strong growth and recovering with impressive speed and resiliency from macroeconomic and political turbulence. As financial markets have been in turmoil from global recessions, and the price of gold has wildly fluctuated, investors have increasingly turned to alternative investments to provide a safe haven for their wealth.

However, investment demand remains relatively low, despite diamonds’ attractiveness as an investment and the industry is supporting initiatives to drive forward the long-term growth of this demand. With the industry focussing on the promoting diamonds as a viable alternative source of investment the future of diamond investing is bright. In comparison to other precious metals this is comparatively small suggesting that there is plenty of room to grow the diamond investment market. Demand for diamonds as investments is still quite limited, accountingfor less than 5% of the total value of polished diamonds.

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To gauge the significance of that number-and hence the market’s growth potential-it is helpful to compare investment demand for diamonds with investment demand for precious metals such as gold and platinum.

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Investors looking for an alternative investment prospect would do well to consider diamonds, which historically have combined low volatility with price growth in excess of the inflation rate. Analysts predict that the market because of positive macroeconomic outlooks the value will continue to show steady growth. At the same time, diamond prices have been more stable than those of silver, gold, and platinum, fluctuating 12% since 2009, 2.8 times less than silver prices, 1.6 times less than gold prices, and 1.1 times less than platinum prices. Overall, polished-diamond prices have risen at a compound annual rate of 5% since 2009, higher than the inflation rate, and certain categories of diamonds, particularly coloured diamonds, have grown at even higher rates.

The long-term outlook for the diamond market remains positive, with demand expected to outpace supply starting in 2019. The supply of rough diamonds in value terms is expected to decline by 1% to 2% per year through 2030 signalling the prospect of strong growth in the value of existing diamond within the market.

Diamond demand forecast

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The gap between supply and demand is expected to widen starting in 2019.http://www.bain.com/Images/FINAL bain_diamond_report_2015_01122015. The supply side of this market remains strong and whilst the outlook is stable, as noted above, there is little sign of significantly strong growth.

However, during the same time, coloured diamonds have surged in value.

For every 10,000 carats of diamonds that are cut, a mere one-carat may possess fancy colour. It is the only known significant source of pink and red diamonds.With the imminent closure of the mine now reported at being as soon as 2020 the diamonds are set to become even more rare.

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The coloured diamond sector has recently received mainstream media attention through a combination of record breaking sales and celebrity interest. Once the mine closes it is predicted that prices will once again soar.

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Pink diamonds are a remarkably good investment. Prices for the finest quality coloured diamonds have increased in value by an average of between 10%-15% per year, which means that some have, on average, doubled in price every 5 years at the dealer level.

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“Argyle pink diamonds outperform any other,” says a coloured-diamond dealer from the USA. “They’re less and less available and more and more in demand. Fifteen years ago we bought Argyle pink diamonds for $10,000 a carat. Today it’s $150,000, $200,000, $250,000 a carat.”

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Some of the ore desirable pieces are seeing even stronger growth than this – see below. There can be few other investments that have shown such strong growth over the past ten years. Furthermore, forecasts predict that this growth is set to continue. Beauty many there is also a strong demand for bespoke pieces using coloured diamonds. Whilst there is strong demand for pink diamonds as stand aloneitems due to their relative rarity. Many designers and jewellers are using pink diamonds to create unique pieces which are still a great investment but also a pleasure to own.

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Developing the Diamond Investment Market

Other opportunities exist to stimulate demand for diamonds over the long term, chief among them the development of a market for diamonds as an investment.

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But complexities and challenges hinder that market’s development, and overcoming them will require the industry’s collective effort.

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Consumer demand accounts for 95% of today’s diamond market; demand for investment diamonds accounts for less than 5% of the total value of polished diamonds.Whilst still in its infancy the investment market forall diamonds, including pink diamonds is gathering momentum. Already there has been strong interest in current supplies of pink diamonds from investment funds and individuals alike.