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Diamonds as an investment possibility
Diamond or gold, you decide…
By: Diamond World News Service
Aug 5 2013 4:08PM
Reference: 8069  

At a time when gold market is volatile, investing in precious stones will offer better yields in the long run. The players in the diamond sector have different schemes to offer in the form of jewellery. Different jewellers adopt different strategies to sell diamonds. Some offer huge discounts, while others even offer free making charges for a certain period of time. Sandhya Sutodia lays out the facts about diamonds as an investment option.

Investing in diamonds promises to be a great alternative at a time when the gold market is volatile and the yellow metal is seen losing its shine. Diamonds can be the investors’ best friend in the long run.

For times immemorial, diamonds have been a symbol of wealth coveted by brides-to-be and collectors, but could these precious stones also find a space in asset allocation for investment purpose?

According to experts, anyone looking at investing in diamonds can consider purchasing the precious stones from a reputed diamond trader, storing them and then selling it anytime in future. However, such a decision clearly can be intimidating for novice diamond purchasers.

One can also invest directly in diamond-mining companies’ shares. E-diamond on exchange platform and diamond stocks are good and effective options. It totally depends upon individual opinions; while some prefer to have physical delivery so that along with the investment, they can wear the diamond, others opt for e-Diamond, which is also playing a bigger role these days.

Companies promoting e-Diamonds back each e-Diamond certificate by physically storing the same. And Anglo American Plc and Rio Tinto Ltd are doing well in the diamond mining sector, industry sources said.

In the last five years, one to five-carat diamonds have provided an annual return of around 12 per cent and this year too global diamond prices are predicted to increase by around 10 per cent. The price of the best gems might even jump as much as by around 50 per cent, according to analysts.

“Factors such as increase in demand, decrease in supply, increase in the cost of mining and inflation (U.S. Dollar vs. Rupee) indicates that investment in diamond is surely going to give better returns than any of the other investments,” said Jignesh Mehta, Managing Director, Divine Solitaires.

“Yes, with the volatility in the gold prices, the falling rupee, more consumers are seen inclined towards investing in diamond jewellery. In the next few years, one can notice an increase in the demand for diamond-studded jewellery. There will be a handful of high net-worth individuals who buy rare stones or a small portfolio of stones as investments. Only higher value diamonds will fetch good returns on the investment,” said Colin Shah, Managing Director, Kama Schachter.

“With regards to investing, diamonds are a specialist area now,” says Namit Dave, an analyst adding that he recommends that an investor should devote a small amount of their portfolio to it – maximum five per cent – but smaller investors may find it unfeasible given the high costs.

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