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We have been aware of the power of gold and other commodities as part of a diversified investment portfolio for some years but can we now consider diamond investments as a real investment strategy?
The global stock markets seem to be on the rebound after several years of negative growth. What we have learned is that even the most blue chip of investments, such as banks and insurance companies, are as risky as any other industry. We know now to diversify. Diamond investments can deliver an alternative and diversified stock holding and provide long term gains in a low inflation rate era.
Oh yes. In early 2013 a rare blue diamond sold for £6. 2m at auction in London. The price per carat was an astonishing £1. 18m. The huge return on this diamond was caused by the rarity of blue diamonds. As the lower the supply, and the increasing demand, will force prices up.
Since the global downturn in commodity prices in 2008, diamond prices have risen by 20% a year for polished and 25% for rough cut. Prices are forecast to rise by 25% per year for the next decade.
This is due to production droughts and the increasing rarity of diamonds, against an increase in demand from the developing world, especially India and China. In Hong Kong the demand for diamonds has risen by 100% in 6 years against a backdrop of mines closing due to poor results.
A further reason for the good returns is dealers are becoming more and more sophisticated in their buying and marketing of diamond investments.
Diamonds are the second most likely product to be provided by borrowers for short term loan financing. This has led to a huge increase in the ability to price and market diamonds from the lenders.companies like Borro and Peer to Peer Lenders have created real expertise in the ability to price a diamond as a collateral.
Diamonds, though increasing in price, are not suitable investments for everyone. They suffer from low liquidity, that is its hard to exchange the investment for cash. So Diamonds only suit long term investors. Also diamond specialists like us at ComparetheDiamond.com (formerly diamondgeezer.com), do not encourage investments in diamonds. All diamonds are subject to sales tax or VAT , which reduces the possible return immediately. Finally, there is an emotional attachment and element of fashion linked with diamond investments. This can have a huge impact on demand over a longer period.
Diamonds are becoming an investor’s best friend. However we recommend buying a stunning diamond ring to propose to the love of your life with rather than trying to make an investment. Speak to the diamond experts at ComparetheDiamond.com (formerly diamondgeezer.com) who can help you understand the nature of the diamond marketplace and current prices.