As shown on the below graph, diamond prices have the tendency to increase over time, whereby the overall consensus is that this upward price movement is very likely to become even more accentuated. For more information about the projected price increases of diamonds, please click here.
An important fact (which you can observe on the graph below) is that diamonds are as a whole ‘crisis resistant’. Whereas all the traditional investment portfolio components (shares, bonds, real estate, future contracts) crashed during the financial crisis of 2008, polished diamonds have proven to be relatively more resistant to this crisis.
Of course, diamonds are not totally immune to price declines. Peak to valley, between September 2008 (when the fall of Lehman Brothers triggered one of the biggest financial & banking crises of all times) and October 2009, diamond prices declined on average by about 16,5%. Gold fell more than 21%, platinum by 59%, the S&P 500 dropped 52%, the Shanghai stock exchange plummeted by more than 69%. Everything fell – and recovered – at a somewhat different timeline. None was immune to this upsetting crisis, but all lost more than polished diamonds. This remarkable crisis resistance of diamond prices has also been apparent in earlier crises (e.g. end of the nineties, 1987, etcetera). Only in the early eighties of last century, diamonds prices have undergone a steep decline, but this was due to a worldwide distorted & speculative diamond financing mindset, with banks financing artificially inflated stocks instead of sound and trade related business. Nowadays the diamond finance industry is significantly modernized and better equipped in assessing the stocks & trade receivables of diamond companies, making a remake of this period very unlikely.
Summarized: the diamond price index shows a structural upward inclination with a solid & inherent crisis resistance, making diamonds suited for investment purposes.
The BAUNAT difference
When you look on the graph below to the price increase gradation within different diamond sub segments (below 1 Ct, between 1 to 3 Ct, above 3 Ct, above 5 Ct, etcetera), we notice that the upward slope is positively correlated with the diamond size (carats). This is logic: whereas it is clear that over time diamonds will become even more scarce than they are today (for more information click here), this trend will be even more applicable for the larger sizes. As these larger diamonds are becoming more and more rare, their correspondent prices rise exponentially. This excessive pricing subsequently leads to an exclusive and very limited buyers’ segment, meaning it would require more time to resell such diamonds at a desirable price. That’s why BAUNAT advises (from a reselling point of view) to invest in the diamond categories between 1 to 5 Ct: for these types of investment diamonds the combination “stability, liquidity & profitability” is optimal (for more information about BAUNAT DIAMONDS' proposition click here).
Evolution of prices, 1980 - 2010