Are Diamonds a better investment than Gold? Or an equally good investment?
asked Jul 30 '12 at 00:03
Share this question
Diamonds and gold are very different types of assets. People have a wider range of means and motives for playing gold. In addition to that, as Bain and Company4‘s Diamond Industry report5 highlights, a major problem with investing in this asset class is the difficulty in obtaining an accurate industry wide price picture.
An ounce of gold is an ounce of gold and there is a spot market to communicate the current price for it. The yellow metal is expected to make a 19 percent gain in 2012, according to Bloomberg’s analyst estimates6.
Diamonds, however, are not created equal and their prospects will vary depending on where an investor’s focus lies. To oversimplify the options, diamonds can be divided into rough stones, investment diamonds (mainly whites between 1 and 5 carats) and special/rare diamonds. For the two latter categories there is little available in the form of reliable pricing forecasts. Estimates for rough diamonds price increases are highly variable ranging from 5 percent to over 10 percent.
The Bain report states that rough diamonds have been showing a steady growth trend of about 3 percent per year.
Saul Singer of Fusion Alternatives7 said that over the past decade, diamond prices have been highly correlated to gold prices. But, he sais over the past 18 months gold has been heavily influenced by global macro-economic uncertainty and inflationary risks.
Although these factors influence diamond prices, they do so to a lesser extent. Demand and supply have been the main drivers for diamond price movements, he added.
answered Jul 30 '12 at 00:05
Here is why I would buy Diamonds...