Observed long term profitability of diamonds

Diamonds carry an intrinsic & sustained value accumulation capacity. Recent indicators and studies project a further increase of the diamond prices for the coming decades. This anticipated price increase is mainly triggered by the combined effect of favorable supply and demand trends:

1. Increasing demand

2. Decreasing supply

1. Increasing demand in the BRIC countries

The BRIC countries (Brazil, Russia, India & China) are characterized by an exploding economy and prosperity, resulting in a growing middle class. India, for example, was dominated by the tradition of diamonds and gold for centuries. But these unique signs of wealth were, until one decade ago, a privilege of the elite population, with a nearly inexistent middle class. The current uprising in India & China of this rapidly growing middle class who is eager to take over the habits of the elite population, has a direct upward effect on the pricing of diamonds in the world market.

2. Decreasing supply due to limited natural resources and a depleting mining capacity

The global mining industry now produces an average of 120-130 million carat gemstones a year, of which diamonds are an important part. Even though this seems a lot, it’s a strong decrease in comparison to previous years. In 2007, the production dropped to 168 million carat, but the previous years the average production was still far above 175 million carats. For the current operational diamond mines, it’s certain that the operating costs will structurally increase, because the exploitation and digging activity is forced to descend to deeper layers. In other words, even without a reduction in production - quod non - the diamond prices will continue to rise. And even if new diamond mines would be discovered (an extremely rare event looking back to the last decades), it is prone to be accompanied by substantially increased operating costs, due to the likelihood that these new mines will be located in hard-to-reach areas.

Moreover, as diamonds do not undergo any alteration over time, they are easy to maintain. The average diamond is approximately 2 million years old. This fact in itself adds to the long term value of diamonds, as there is no depreciation element to take into account. In most countries, profit gains on the sale of diamonds are generally speaking not taxed, assuming the seller is not an active professional in the business.

Resistant to crises History of diamond prices