Investing in diamonds
Mother nature’s most resistant substance. Diamonds are not only valuable investments but also beautiful and desirable objects. They can be worn and enjoyed as jewellery, making them a versatile investment. Due to their low correlation compared to traditional asset classes, these gemstones are suitable for diversification purposes. The monthly volatility over the last 5 years for high-quality diamonds (D-FL / D-IF) is below 3%.
The global demand for diamonds is steadily increasing, driven by the demand from Asia and attractive investment opportunities in diamonds.
The global diamond market was estimated at $94.9 billion in 2021 and is expected to reach $139.9 billion by 2030. Furthermore, the long-term investment horizon and the limited liquidity of the diamond market have a positive impact on their performance.
According to the National Jeweler, 2021 was a surprisingly strong year for diamond jewelry sales, and the momentum continued in 2022. Despite sanctions on Russian diamond producers due to the invasion of Ukraine, manufacturers were able to process existing Russian diamonds, and De Beers increased its production to meet demand. This resulted in a smoother supply chain and alleviated concerns about shortages. However, in 2023, increased demand and potential further restrictions on Russian diamonds in the U.S. and Europe could put more pressure on the supply of natural diamonds. This is expected to lead to higher prices for natural diamonds, which may benefit the lab-grown diamond market, although that segment could face its own challenges in the coming year. Smaller players in the industry are advised to be diligent about sourcing and clarify their preferences with suppliers.
⚠️ What are the risk factors to consider?
Authenticity: There is a risk of counterfeit or synthetic diamonds being sold as natural diamonds. It is therefore important to choose a reputable and reliable dealer and have the diamonds certified by a recognized institution.
Trusted supplier: It is important to choose a trustworthy expert who has a good reputation and is willing to answer any questions. If you want to buy a diamond online, you should also ensure that the seller has a good online presence and positive reviews.
Sustainability: Diamonds are often associated with environmental problems and human rights concerns. It is important to ensure that the diamonds have been ethically and sustainably sourced.
Certificate: When purchasing a diamond, one should demand a certificate that confirms the characteristics of the stone. Such a certificate should be issued by a reputable testing laboratory such as GIA, HRD, or IGI.