- limited volatility
- influence of De Beers and economic climate
- Diamond quality, diamond size and shape
- Investment tips
Diamonds are widely desired for their luxurious appearance and their brilliance. But for investors the future value of a diamond is the most coveted element. Whether a diamond will rise or decrease in value depends on both the general financial market as on the specific characteristics of the diamond market.
Diamond price has a limited volatility
Edahn Golan, an independent diamond industry analyst, states that the price of diamonds doesn’t fluctuate so strongly, compared to other investment markets. Between 2004 and 2013 the price rose approximately 33% on the IDEX Online Polished Price Index, an index composed of several diamond prices. Despite an occasional peak up or down the price of diamonds remains relatively stable.
Influence of De Beers and economic climate
One of the main reasons of the constant price of diamonds is the impact of the monopoly of De Beers on the market. If prices fall, De Beers limits the supply of rough diamonds or– reversed – the supply will likely be pushed up if the price becomes too high. However, also other global economic forces have influence on the price level of diamonds.
The global economic climate also acts as an instigator or damper on consumer enthusiasm for diamonds. In times of relative prosperity, marketing campaigns and higher expendable income lead to an increased demand for diamonds and provide a rising diamond price. In the same way, retailers estimate the demand for diamonds and organize diamond stocks accordingly. When the demand for diamonds is high, they tend to invest in large stocks and are willing to pay higher prices.
Diamond quality, diamond size and shape
Whether a diamond rises or decreases in value depends on the quality of the diamond. As the financial website Bankrate points out, only 1 out of 50 of the diamonds sold in 2010 were potentially less valuable. Certified diamonds, which meet the stringent criteria of recognized diamond laboratories, will rarely drop in value. Synthetic diamonds, which are artificially created, will not increase but rather drop in value.
Edahn Golan also states that certain diamond sizes and shapes rise or decrease in value faster than others. For example, there are greater price fluctuations for 3 carats round diamonds in comparison with smaller diamonds. The price of diamonds from 4 carats and up show the largest fluctuations. Their price tripled between 2004 and 2008, even before the financial crisis presented itself.
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