As the world’s currencies fluctuate widely and the global economic crisis is yet to see the end, wealthy investors have increasingly focused on hard assets protecting their assets.

Recently, with precious metals like gold and silver having taken their head at the table of investing,
their is a radical departure in play.

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In fact, a new generation of hedge funds are aiming to take precious metals as the new hot investment as they show (visit this site https://forum.imperialhero.org/int/index.php?action=profile;area=showposts;u=8040) all the signs of speculation. The largest publicly traded diamond company, is also collaborating with a Swiss asset manager
on a $250m fund to buy diamonds wholesale to store in a vault, using money from hedge fund investments. Peter Laib, chairman of Diamond Asset Advisors, the Swiss group collaborating with the company, says “After the sub-prime disaster and the economic uncertainty, investors are looking for low-volatility investments. Diamonds are less volatile, as they are resistant to speculation by the financial community and therefore, there are no derivatives or tradable products and non short selling possible.

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He says the fund could offer annual returns of as much as 12 per cent.

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“Diamonds have shown consistent growth over the years, polished diamond prices have grown 100 per cent since 2004, and this only looks set to continue at an accelerated rate.”

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Diamond prices are certaintly on a trajectory. Meanwhile 3-carat diamonds have gone up a staggering 238 per cent over the same timeline. Prices of 1/2-carat diamonds have risen a remarkable 49 per cent since 2001. One-carat diamonds have risen by 88.9% per cent in the same period.

Pressure on supply is one factor driving prices, says Mr. Laib. “Supply constraints are a big factor, with few or no mines expected to emerge over the next decade. Existing mines are for the better part
past their peak, meaning supply will decline.’ He noted that supply demand gap could add as much as a 3 to 4 per cent premium to diamonds over the next few years. But a turning point in 2001, when the company went private. It had previously held stockpiles of diamonds, but when it went private and took on debt, it was forced to sell these, keeping prices flat.

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Mr. Laib, also stated, “Once that stockpile was depleted, prices started to rise again, as the market forces took control. De Beers now controls approximately 40% of the market. Things made a major
fundamental change. The market is now liquid and tranparent. ‘

Will diamond investments succeed in taking over from gold? One director of a prominent independent financial advsior has expressed concern over being apply fixed values to diamonds in index form, as with gold. “Diamonds are different. They should almost be appraised as works of art. It’s not like gold, where there’s weight, Buy Lab Created Diamonds (diamonds.backtoglamour.com) and that’s it”
he comments “there is such a variety of factors with stones. Gold is gold is gold. Diamonds are higher risk because the pricing is opaque.

There is no doubt that wealthy investors are becoming more open-mined about the types of commodities they invest in. The sheer anxiety about international currencies has seen interest in collectables as luxury goods grow.6 per cent of their fortunes to non-financial assets such as collectables.

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Rare sports cars and art works are achieving record sales figures. Art, too, has become a major focus. ‘People are seeking to diversify their portfolios,” says an advisor.

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High profile estate jewellery are also in high demand. In December 2011, Elizabeth Taylor’s jewellery collection broke all records at $157m.

“Diamond prices were up before these hedge funds. People are seriously seeking concrete investments that are also portable. “in 1996, Chrisite’s sold $273m worth of jewels globally. In 2011, that reached $605M. In the first half of 2012 we’ve sold #304m.

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Will diamond commodity trading have an impact on fine jewellery retail sales?

“It will mean that buyers are more interested in large flawless stones. They will also want the best and the majority of the value to come from the stone,” says Mr. Laib. “If you have an exquisite crafted piece but with smaller stones, you are losing alot of the value in the labour.”

He cotinues by saying, that the funds could further fuel retail sales of fine jewellery. He say, ‘It gives a feel good feeling about buying pieces. You lose a large piece of value by buying at retail, of course (as opposed to investing in diamonds as a commodity at wholesale prices), but the fact that diamonds are seen as assets will make them more attractive.