Medlars Jewelry News

Investing in Diamonds?

Often I'm asked if diamonds are a good investment. I am not a financial advisor, but I can share the same charts that I reference for my own diamond investments.

This chart tracks a 1 carat, colorless (D), internally flawless (IF), round brilliant cut diamond from 1960 to January 2016. The overall rate of return has been 14.47% equal to a compounded annual rate of 4.3%. Not as good as stocks or real estate and diamonds can be just as fickle.   

From 1980 to 1983 there was a huge diamond bubble, of which this chart does not show the steep drop in prices. Dealers and investment bankers were selling diamonds back and forth at higher and higher prices. At that point De Beers said “enough” and released inventory into the market driving prices down. Eventually prices began moving up again until the  Great Recession , which depressed prices from 2008 through 2010. Prices for finished polished diamonds only dropped about 10% mainly because diamond suppliers refused to sell at lower prices. This action had a stabilizing effect on diamond prices. 

Since 2010 prices have rebounded nicely (if my memory is correct) from 16K to the current price of about 23K, for a perfect D color, internally flawless 1 carat diamond. It’s important to note that after peaking in 2012, prices for “D-Flawless” have in fact dropped, along with all other commodities, by roughly 10% over the past 4 years. Even more interesting, while “D-Flawless” dropped in price, VS-2 clarity and H color diamonds appreciated by about 10%. Like all investments, timing can be critical. We’re clearly not in a  bubble  and it appears to me that commodities may be bottoming. I do have a few personal opinions when a client is buying investment diamonds. First, I don’t believe in investing in D color, internally flawless diamonds. In the 1980 collapse all diamonds went down, but the greatest decrease in price were the D color, internally flawless diamonds. I would suggest that you stick to 1 carat or larger, round brilliant cut, SI-1 to VS-1 clarity, G to H color, and certified by G.I.A. or A.G.S. with excellent cut and symmetry because those parameters are the top retail sellers for diamonds. I personally feel that sticking to those parameters will be just fine in the long term diamond investment. Diamonds are one of the very few things you can wear and have it appreciate over time.

Posted by on 23rd December, 2015 | Trackbacks

comments powered by Disqus