As stock markets swoop and dip and mainstream financial firms are hit by bad publicity over shady practices, alternative investments can seem like a safe haven for those seeking stability and security.
Alternative financial markets are typically tangible goods as diverse as real estate, art, or even rare baseball cards and comics. These assets are illiquid, but are nonetheless considered to be exceptional quality over the long-term. One of the rarest and most sought after investments in alternative investing is that of high quality gemstones, and especially the area concerned with the acquisition of colored diamonds.
The Spectrum: Blue, Green, Yellow, Red and Pink
It remains to be seen how the Chinese stock market troubles will impact the prices of colored diamonds. The Asian market, especially mainland China and Hong Kong, are among those that are the driving force behind rising per-carat prices, leading to a rise in demand worldwide. This isn’t only among the billionaire class either; many small investors and private buyers see these colored gemstones as a stable asset class and one where they can trust that the long-term market will only enhance the value of their stones. Even during recession colored diamonds took a hit, but began to recover their value within a year. The rarest blue and red-to-pink diamonds were withheld from the market until their prices appreciated in respect to their rarity, which in turn, accelerated their appreciation.
Investors are coming to prefer rarer stones as they offer high value, steady appreciation and low volatility. These qualities make them bulwarks against inflation, keeping their value steady even when the stock market is crashing and burning. Colored diamonds are now considered investments on par with precious metals such as gold and platinum. Carefully reviewing and selecting stones should be done in conjunction with a professional in the diamond trade. This process includes purchasing from reputable dealers, and having your investment diamonds appraised by certified appraisers.
While some traditional financial contusions tend to downtalk alternative investments such as fancy colored diamonds, proof is in the pudding. Total appreciation of pink diamonds from January 2005 to April 2015 was 320 percent, while blue diamonds appreciated 159 percent and yellow appreciated by 55 percent. Colored diamonds represent less than 1 percent of the world’s total diamond output. With no new commercially viable sources of colored diamonds on the horizon coupled with aging mines and high costs of converting from pit mine to underground, the rarity of these stones will only increase. The Argyle mine, source of 90 percent of the world’s pink diamonds, is slated for closure in 2020 or 2021.
While mining technology is always advancing, at current levels of technology there are simply some diamonds that it is not commercially viable to mine. Some historic mines are even scrounging diamonds out of their mountains of tailings when pit and underground operations have ceased. Demand is expected to significantly outstrip supply within the next decade, so purchasing and holding stones is something prospective investors should consider as a strategic long-term investment and should not be expected a short-term flip.
For more reading on alternative investments, click the link below:
- Treasure Assets: Alternative Investments for Business and Pleasure
- Alternative Investments: Investing Outside the Box
- The Pink Diamond Investment. Is It In Your Portfolio?