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Diamonds.....forever a safe Investment bet For Making Money?

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Diamonds.....forever a safe Investment bet For Making Money?
You know the clichés. Diamonds are forever, as well as being a girl’s best friend. Here’s a new one: diamonds make a damn good investment option. Sure, India has traditionally gone for gold. And diamonds don’t have an exchange where one can track their prices, there’s also the issue of reliability of grading agencies.

Besides, low liquidity and imposition of various taxes in most developed countries also somewhat dampen the effectiveness of diamonds as an investment medium. But a change is in the air. And a glittering one at that.

Today, a whole new breed of consumers are investing in diamonds. And their aspiration is backed by current market statistics and the ever-growing value and potential of this aspirational commodity. Says Anuj Rakyan, VP, Gitanjali Group, a major player in the branded jewellery market with brands such as Gili, D’damas, Asmi and Nakshatra, “

In the past three years, diamond prices have risen by 40% and are expected to show a sustained growth in the future. With such market trends, investment consultants are now in favour of considering diamonds as a safe and lucrative option for investment, especially for long-term plans. It is sure to have guaranteed returns just as in gold.”

The good news gets better. According to Diamond Trading Company (DTC), which is the world’s largest diamond mining company and also the sales and marketing arm of De Beers, diamond prices rose 15% in the previous year. This, coupled with the buyback schemes offered by most retailers has allowed shoppers to scoop up the stones faster than ever before. “With a compounded annual growth rate of 15%, India is one of the fastest growing markets for diamond jewellery in the world, next only to the US and Japan,” says DTC. The company estimates the collective growth in the past two years to be a staggering 50%.

“If you look at it from the long-term perspective, then, you can safely say that during the last 10 years or so, diamonds have fetched at least double the return of bank interests, while in the case of some rare diamonds, the return has been much higher,” informs Kamal Gupta, chairman and managing director of the Delhi-based P P Jewellers Group, recipient of 12 consecutive export performance awards from the Gems & Jewellery Export Performance Council.

Thus, so far as returns are concerned, diamonds no longer remain the ‘poor’ cousin of the yellow metal. And the future prospects look bright in comparison with other aspirational commodities.

Says Mr Rakyan, “A major factor supporting the hike in diamond prices is the revaluation of the Chinese currency. Since diamonds are priced in dollars around the world, a stronger yuan will make the jewels more affordable for Chinese consumers. Heightened demand in China could push up global diamond prices further, with some industry analysts predicting really high diamond prices in the years to come.”

DTC controls around 60-70% of the diamond mines in the world. The ‘roughs’ supplied to the sightholders by them are showing a constant rise in prices. Hence, cut and polished diamonds prices are also bound to appreciate constantly. Another positive investment parameter of diamonds is their high value per unit weight, which makes them easy to store and transport.
A high quality diamond weighing as little as 2 or 3 grams could be worth as much as 100 kilos of gold. This extremely condensed value and portability bestow diamonds as a form of emergency disaster fund. Besides, being such a highly-aspired commodity, demand for diamonds always outstrips supply. “It can be everyone’s best friend. The acquisition of diamond jewellery by the masses is increasingly rapidly,” says Mr Rakyan.

Price appreciation, however, depends a lot on the exclusivity of the stone, amongst other parameters such as colour, clarity, carat and cut of the diamond, as also broadly, the state of the economy. Hence, “cheaper, widely available diamonds are not rare enough to be considered as investment, as price appreciation may not be enough to even cover inflation. This puts the investment grade rare diamonds largely out of reach of retail investors,” says Amit Sarup, head, wealth management, Religare Securities Ltd.

Mr Gupta of P P Jewellers agrees. “Small diamonds may be good for retail buying, but are not good for investment because they are not likely to have much resale value. Besides, in India diamonds are usually not certified. So, if anyone wants to buy diamonds for investment purposes, one should go for big diamonds only — because the bigger it is, the greater would be its value as well as the resale value,” he adds.

These gemstones come in different avatars. Stars and malles are commercially most viable in diamond jewellery in India. Hence, these sizes are always in demand. Even the larger sizes, the solitaires, are an excellent option for investment. If these solitaires are purchased in higher clarities, they can certainly yield good premia.

According to experts, while fine, large 5+ carat white diamonds can be seen as investments, diamonds with the best appreciation track record are naturally coloured diamonds such as yellow, pink, blue, green, purple and red. “In recessions, they tend to move laterally and in healthy economies or inflationary times they tend to move up in price.

According to some price studies, blue diamonds have approximately doubled in price every five years, pink diamonds have doubled in price about every 6-7 years and yellow diamonds have done so every 8-10 years since 1970,” informs Mr Sarup.

He, however, warns that in terms of an investment, the time horizon must always be kept in mind. In the case of diamonds, the time span required for the investment to gain value could be in years that may not be acceptable to many investors.

One always knew that diamonds look best from certain perspectives. Ditto for looking at them as an investment option. But then, they really do last forever! Earn Easy Money

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