Diamond Investment Fund

The rising prices in high-end diamonds have not gone unnoticed by the financial markets. On June 24, the first publicly traded polished diamond fund will be launched on the London Stock Exchange. The closed-end investment fund, named Diamond Circle Capital plc, will consist of rare white and colored diamonds.

As mentioned in earlier blog articles, rare diamond prices are exploding as worldwide demand grows at a faster rate than production. In the past, investors who wanted to profit from these increased diamond prices had to purchase shares in diamond mining companies or buy diamonds directly. Diamond company profits are not necessarily growing as fast as prices of high-end diamonds. Likewise, buying and selling diamonds is a risky proposition for the average investor. The new diamond fund will provide investors an easy way to invest in diamonds without having to be a diamond expert or in the diamond industry.

While the upward trend in rare diamond prices seem to be a sure thing, every booming investment seems to be a sure thing just before it crashes. Like any speculative investment, the potential for high rewards goes with very high risks.

The diamond investment fund will be one world-class diamond collections but it is doubtful that it will have any a significant impact on the market for diamonds. However, the launch of this new fund is a clear sign that speculation in diamonds is rampant and speculation is driving a significant part of the current price increases.

Synthetic Diamond Terminology

Consumers shopping for diamonds are often confused by some of the terms used to differentiate natural diamonds from diamond produced by man. Part of the problem stems from marketing strategies that intentionally cloud the issue in an effort to position their project as being different and somehow better than other synthetic diamonds.

At a World Diamond Congress meeting in Shanghai recently, the three major international diamond and jewelry trade organizations agreed on standardized terminology that is acceptable to describe synthetic diamonds. Those organizations included the World Federation of Diamond Bourses (WFDB), the International Diamond Manufacturers Association (IDMA), and the International Diamond Council (IDC).

According to the new rules, laboratory created gem-quality diamonds can be described by the words: “synthetic”, “laboratory-grown”, “laboratory-created”, or “man-made”. The word “diamond” or “diamonds” must always follow these descriptors. The term “cultured” is not acceptable to describe gem-quality synthetic diamonds.

With the quality and quantity of synthetic diamonds increasing, the diamond industry is adjusting its diamond grading and marketing processes to allow consumers to make informed decisions about whether to purchase natural or synthetic diamonds.

Expected Diamond Price Increases

De Beers has scheduled sightholder meetings in July and August, which is where they sell the rough diamonds to cutters. Industry expectations are that there will be significant price increases for rough diamonds and that the expected increases will probably take place in August rather than July. Traditionally De Beers announces in advance what the range of increases will be but that information has not been released, resulting in anticipation of double digit increases in for some groups of diamonds.

Price increase announcements for rough diamonds are usually scheduled ahead of the three major industry trade shows (Basel in March, JCK Las Vegas in June, Hong Kong in September). Price increases tend to be the greatest for larger diamonds since those are the items with the biggest differential between supply and demand. The last major price increase was in May with average prices increasing about 8% but some four-carat and above diamonds increasing over 20% in one day. Production of small diamonds tends to be more in line with demand so they have seen relatively small price increases.

The price increases for polished diamonds tend to follow close behind the rough diamond price increases so the likely timeframe is August or September. If you are planning a large diamond purchase in the next few months, I would suggest taking action sooner rather than later. We do not know when the retail price increases will occur, for what types of diamonds, or how much the price increases will be, but all the signs are that they will go up near the end of summer. It would be a shame for a consumer to pay 5-10% more just because they waited a few weeks too long to make their purchase, especially if they have been made aware of the impending price increase.

"Once in a Blue Moon" Diamond Collection

For colored diamond lovers, the annual Rio Tinto Argyle Pink Diamond Tender is the highlight of the year. A select number of special pink diamonds are offered for sale and attract top prices from “by invitation only” buyers worldwide.

While it is hard to beat the beauty and rarity of the pink diamond sale, this year might be the exception. Reo Tinto’s Argyle Diamond Mine has announced the upcoming sale of a unique “Once in a Blue Moon” collection of blue diamonds. The collection will be shown to select, invited buyers during viewings in Perth, Hong Kong and Tokyo leading up to final bids closing on April 8.

Josephine Archer, Sales and Marketing Manager for Argyle Pink Diamonds, noted, “We are excited to showcase our first ever collection of precious blue and violet Argyle diamonds, sourced from several years of production at the mine. It is an enchanting collection that will appeal to connoisseurs and collectors alike.”

The “Once in a Blue Moon” collection will include a variety of colors, single cuts, matched pairs, and smaller diamonds. This event will no doubt raise the awareness of blue diamonds worldwide even though only a limited number of people will see the actual collection.

July Rough Diamond Prices up 5%

De Beers Diamond Trading Company (DTC) has increased the average prices of rough diamonds more than 5% at its sixth sight distribution July 7-11. While the average was over 5%, the price of higher quality rough diamonds over one carat increased as much as 15 percent.

The next sightholder rough diamond distribution, scheduled for the week of August 18, will likely have further price increases.

The prices of polished diamonds tend to track closely with the rough diamonds because the cutters and wholesaler have to pass on the increased cost of new diamonds. It is only a matter of days or weeks before the retail market reflects these increased diamond prices in polished diamonds and diamond jewelry.