Investing in fancy coloured diamonds
Research indicates that only one in every few hundreds of thousands of diamonds, possess enough natural colour to be referred to as a fancy coloured diamond. For this reason, fancy coloured diamonds are purchased almost exclusively for the intensity and distribution of the diamond's colour, as opposed to white or colourless diamond. Their cut proportions and clarity are other primary indications of value. As a general rule, the more intense the colour, the rarer and more valuable the diamond is.
6.02 Carat Pear Natural Fancy Deep Blue VS2
In recent years, fancy coloured diamonds, especially the larger and more uncommon ones, have emerged as a unique and attractive investment opportunity. These diamonds typically have an individual price tag of $500,000 and up. Proponents of the diamond asset class show that rare fancy coloured diamonds have exhibited strong price appreciation in the recent years. It has been claimed that this trend will continue in the foreseeable future.
Rare diamonds have proven to be resilient through adverse economic conditions with only marginal price declines occurring in recent economic downturns. One of the possible drivers for the increase in price is the declining global supply of rare fancy coloured diamonds, as existing diamond mines have yielded fewer of the rare stones each year. No new significant diamond mines with notable fancy coloured diamond production have been discovered and often exploited as of late. Another important force for rising prices is the increasing global demand for rare fancy coloured diamonds. This is due to the general worldwide demand for tangible asset investments and the growing number of high net-worth individuals around the world, specifically in Asia. The projected growth of Asian economies in both the near and intermediate term is a fundamental game-changer in diamond investments, with Asian cultures placing particular value upon investments in gold, diamonds and rare gems. Moreover, some investors believe that rare coloured diamonds may provide excellent inflationary hedges, based on past pricing performance.
Today's diamonds are mined in about 25 countries by some of the world's largest mining companies, such as Rio Tinto, BHP Billiton and De Beers, a significant portion of rare fancy coloured diamonds still originate from developed countries. Here, diamonds are extracted by small- scale miners working in the informal sector. These small-scale miners often use simple artisanal mining techniques in alluvial deposits. The process of alluvial diamond mining involves digging and sifting through mud, sand and gravel using shovels, sieves, or even bare hands. Typically, diamonds come from geologic rock formations called Kimberlites. Kimberlitic rock formations contain diamonds that have eroded over time by rivers and streams. They can deposit diamonds in the sediments carried by those streams farther downstream from the original rock sources. These deposits are called alluvial diamond deposits. All rare fancy coloured diamonds originate in diamond mines, either alluvial or kimberlitic. Like any other diamond, rare fancy coloured diamonds are discovered in rough form, which require cutting and polishing before these stones can be marketed to end-consumers. Naturally, the finding of rough diamonds that could potentially become rare fancy coloured diamonds is random and impossible to predict. Since retrieving these stones from mines is difficult, projected rough fancy coloured diamond supply produced from mining operations, is expected to remain largely unchanged or to slightly decrease for years to come. Furthermore, there are no mega-mines, such as De Beers' rich mines in Botswana, Jwaneng and Orapa, which have been in service for more than 30 years, in current development. As it commonly takes a decade to develop a significant mine from exploration to commercial production, it is unlikely that the primary supply picture for RFCDs will improve before the end of the decade.
On the demand side, rare fancy coloured diamonds frequently sell at retail prices surpassing $1,000,000. Their consumer profile is meaningfully different than that of a regular diamond buyer. In 2010, the general end-consumer who purchased a rare fancy coloured diamond was male, shopping independently or accompanied by his partner, rather than a self-purchase made by a female consumer. This consumer is an Ultra-High-Net-Worth-Individual (UHNWI), referring to a frequent jewelry and diamond connoisseur who has purchased important white and/or coloured diamonds in the past and understands the unique proposition of the fancy coloured diamonds. One of the most intriguing characteristics about this consumer, learned from our own experience, is that more often than not, he would be of Asian origin, regardless of whether the transaction took place in San Francisco, London or Hong Kong.
As more baby-boomers grow restless over meager nest-egg returns, fueled by a sluggish economy, a depressed real estate market, and a 0% interest environment, they have discovered alternative asset classes, as a potential means to diversify small to medium portions of their investment portfolios. Gold, either through physical purchases of coins and bullions or through exchange traded funds (ETFs), has long been identified by many as a coveted portfolio ingredient. Some savvy investment professionals believe that diamonds, especially those that are unique and scarce such as rare fancy coloured diamonds, are the next asset class to penetrate global portfolios.
The Growing Popularity of Gemstones
Many celebrities are hopping on the trend of buying and wearing big, bold and colourful jewelry. Because fancy coloured diamonds offer a purer colour than plain, colourless diamonds, gemstones have become a hot commodity among celebrities. Gemstones, specifically rubies, emeralds and sapphires, have the ability to add elegance and a vibrant beauty to anyone who wears them. Gemstones have an allure and attraction in the way that the colour in the gemstones give off a vivid and intense quality look, making any jewelry piece that contains these gemstones to look appealing. The trendiest cuts being seen in Hollywood this season, is the emerald cut, marquise cut and heart cut.
The current most worn gemstone in Hollywood this year of 2011, during red carpet events, is the emerald. From Hollywood superstars Megan Fox who wore teardrop emerald cut emerald earrings at the 2011 Golden Globe Awards to Nicole Kidman’s triple tear dropped marquise cut emerald earrings at the 2011 Grammy Awards to Celine Dion’s raved-about yellow-gold necklace with a big radiant cut emerald stone hanging off the chain at the 2011 Oscars, emeralds are just the new must-have to addition to any jewelry piece. Reese Witherspoon, Amy Adams and Angelina Jolie are other popular celebrity names, who are flaunting emerald stone jewelry. Emeralds and sapphires are said by jewelry experts, to best compliment a wide range of skin tones and hair tones, which is why so many different-looking celebrities are flashing these gemstones. Hollywood experts say that this jewelry trend of gemstones is only going to continue, as many more fashion/jewelry designers are seeing the popularity of the gems and adding them to their fashion lines. Names like Louis Vuitton and Lorraine Schwartz, have added emerald stones into their fashion line. With celebrities being known to be the trendsetters, emerald and sapphire jewelry pieces are eventually going to be in everyone’s jewelry boxes.
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