Tips and Tricks

Are Diamonds A Good Investment?

A wallet with 100 dollar bills sticking out

Before I completed my Graduate Gemologist Diploma (G.G.) from GIA I earned a certification called The Accredited Jewelers Program (A.J.P.). The course is designed to teach the basics of jewelry, colored gemstones and diamonds for those who wanted a career in the retail jewelry industry. In one of the lessons, they mentioned that a jeweler or salesperson should never indicate to a customer that purchasing jewelry is an investment! This was a big NO! NO!, according to the FTC (Federal Trade Commission).

Here are some reasons:

  • Jewelry/loose diamonds have a 2-3 times markup from wholesale (this number is much less when shopping online).
  • When you try to sell your estate (used) jewelry back to your jeweler, they typically offer you 10-30 cents on the dollar depending on what you have.
  • The price of precious metals i.e... gold, silver, platinum and palladium fluctuates daily, however, the jeweler will only give you the scrap or melt price per gram.
  • You should buy a piece of jewelry because you love it, not as an investment.

Some Diamonds Are Considered Investment Grade But Should Not Be Marketed As An Investment.

When it comes to buying diamonds, much of what I just mentioned applies. Jewelry, including loose diamonds, should not be marketed as investments. HOWEVER, there are three qualities in diamonds that can make them more valuable.

Most of you have read or seen pictures of the “Hope” diamond. It was mined in the 17th century in India and eventually purchased by a French Jeweler named Jean-BaptisteTavernier. It was referred to as the “Tavernier Blue” until 1839 when it was renamed the “Hope” diamond after a prominent London banking family. They had the diamond re-cut to its current size of 45.52 carats. GIA graded the diamond as a Fancy Dark Greyish Blue. The current estimated value of the Hope diamond is between 200-350 million U.S. dollars. At 300 million dollars the diamond would be worth 6,590,509.67 dollars per carat. That’s an expensive hunk of carbon!

The Hope diamond hit the trifecta (size, color and clarity) to be an obvious choice as an investment grade diamond. Unfortunately, it is currently housed in a museum and not on the market even if you are Daddy Warbucks! The good news is that there are diamonds with just one or two of the three criteria that are in the reach of the sophisticated investor.

What’s Hot

Since COVID has slowed and even shut down diamond mining, the prices of all diamonds are on the rise. The most significant event in the industry was the closing of the Argyle Mine in Australia in November of 2020. Mining commenced in 1985. During its thirty-seven years of production over 800 millions carats of diamonds were extracted. The vast majority of these diamonds were low grade brown diamonds. However, they were the undisputed champion of other more desirable colors such as pink, red, yellow, green and blue. One Fancy Intense pink diamond weighing 24.87 carats sold for 46 million dollars. The mine produced 90% of the world's pink diamonds.

The Argyle diamond mine in Australia (now closed)

This has created a perfect storm with fancy colored diamonds. COVID shut down production of active mines. Then Argyle, the largest producing mine of colored diamonds in history, closed. Prices went through the roof! Here is some perspective. In the 1980’s some fancy pink diamonds were selling for $10K a carat. Currently, larger pinks can average over $300K per carat. At auction a Fancy Intense Pink sold for 1.8 million dollars.

A fancy pink pear shaped natural diamond . Fancy yellow diamonds are much more affordable but still demand a hefty price. Depending on size and grade, they can range from 2.5K - 20K per carat. The rarest diamond color is red. There are only thirty known examples and they are all under .25 carats.

Yellow_diamond_ring_1d9c2c382f.jpg

What About Colorless Diamonds?

One report I read stated that high quality 1 carat colorless diamonds and above are up about 12% over the last year. Smaller, lower quality stones are holding steady. When diamonds surpass the 2 carat range, they jump exponentially in price. Some can demand up to six figures. One recent study reports a colorless 3 carat diamond is up about 130% over the last ten years.

Should You Take The Leap?

Obviously, I cannot say that diamonds are a good investment. However, It is impressive to see the phenomenal rise in the price of natural fancy colored diamonds over the past thirty years, while high quality white diamonds have increased from 10-130% (depending on size) over the last ten years. Fancy pink diamonds are up 300% for the same period. It is undeniable that some diamonds have outperformed other trusted investments over the years.

FYI. Before taking the leap with an investment grade diamond, do your research and consult with recognized experts in the industry. It’s a big decision that should not be rushed into. Always adopt the maxim from the world of finance. “Past performance does not guarantee future results!” When I see a rare diamond or gemstone, I am not thinking dollars and cents. I envision rough being extricated from deep in the earth and transformed into a magnificent gem. I could stare at them all day. They bring me such joy!

A rough diamond next to a round faceted diamond

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