Comment on Bloomberg’s News Report: Are Diamonds Now an Investor’s Best Friend?

[Video Link: Are Diamonds Now an Investor’s Best Friend?]

The above video link is an interesting discussion if Diamonds are a good investment?    Key points which I got from the video was that it is NOT a good investment because diamonds prices have dropped 20% from beginning of year as compared to only 5.7% drop of Gold, 5.5% drop of Equities and 1% drop in property.  

However,  when I was listening to discussion back and forth I noticed there was one important fact which was left out. The reporter assumed that, because the Rapaport’s Diamond price list (the price list used in the diamond trade) for D-color, IF-clarity diamond has dropped 20% from the peak last year –i.e. from US$27,000 per carat to US$20,000 — that is why you can assume diamonds prices have dropped 20% from peak.

However, in practice diamonds are usually purchased in the market based on discount rate or premium rate from the Rapaport price list.   Therefore, just because the diamond price list has drop 20% does not mean that you lost 20%.

Actually, if you did invest in a D-color, IF-clarity diamond last year and assuming you bought the diamond at the right price at that moment of time you would lose no more then 5%.

I do agree with the report regarding issues on liquidity and a proper market spot price when trading diamonds, but this can be a double edge sword as more liquidity can cause more volatility as we have seen with Gold Spot prices everyday for the last 3 years.

Therefore, I agree with the expert in the video on the point that diamonds are actually less volatile investment because it has very similar characteristics like buying an A-grade property or any beautiful piece of art.

For any of these items, if they have unique characteristics and are beautiful & stunning, prices will never drop as there will always be demand from the high end-user.

For example, an apartment in Manhattan, New York hasn’t drop in prices as compare to houses in Phoenix, Arizona because its still the ideal place for ultra-rich to live.

I hope you enjoy my comments and if you like to give some feedback please feel free to write your comments below or send me a message at
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