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Naturally Colored Diamond Blog

How Will Investing In Colored Diamonds Change In The Future?

Posted by Tony Cathaway on 9/13/18 9:06 AM

One of the best ways to determine market demand, and ultimately which diamond colors are best for investing, is to monitor auctions. During the past 3 years, most colored diamonds sold were bought with the intention of investing, meaning that the days of pure “aesthetic appeal” that drove diamond sales are long gone.

Nowadays, investors seek for transparency and high quality stones that will not only show promising concentration of wealth, but also great potential for growth (in value) for the decades to come.

blue diamond

Summary

In this article, we will briefly be looking at:

  • The most prominent price trends for three major colored diamond categories (Pink, Blue, Yellow)
  • Most recent records broken
  • The influence of the Argyle mine during the period of 2017
  • Our thoughts on what the future might hold for the diamond industry

Price Trends

Using data published by the FCRF, it would seem that since 2005, the market's main colored stones have seen a healthy rise in appreciation. The overall winners however were the Pinks, showing the highest price increases on average.

Source

As we all know by now, the prices of fancy colored diamonds are directly related to their rarity (perfect 4Cs), coupled with the basic economic principles of supply and demand. So it would seem that the driving factor behind the constant price rise in Pinks and Blues is a steady increase in demand with a limited (or even non-existent) supply.

price of colored diamonds

Most of the rare blue and pink diamonds, especially those appearing in the auctions, are pre-owned stones, not freshly mined.

Understanding this supply-demand balance is critical for a diamond investor, especially when determining which diamonds have the potential of achieving the highest ROI when liquidated.

 

Recent Records that Shook the World

2017 was a truly exceptional year when it came to record breaking diamonds. A total of 9 diamonds made headlines last year, with 4 setting new records for overall price paid in their color category; and 5 breaking previous records for price per carat paid.

Perhaps the most notable stones from last year was the 59.60 carat Fancy Vivid Pink diamond known as the Pink Star which sold in Hong Kong back in April, and acquired by Chow Tai Fook, for $71.2 million, essentially dethroning the Graff Pink for most expensive pink diamond in the world. It also dethroned the Oppenheimer Blue for the title of highest price ever paid for a colored diamond at a public auction.

 

 pink star.png

 Image credit: Sotheby’s

 

Total Auction Sales of The Major Auction Houses: 2016 vs. 2017

The combined sales of the top 2 auction houses, Sotheby’s and Christies, totaled $1.115 billion for 2016 and $1.112 billion for 2017, equating in a small decline of 0.269% (we will be adding the results for 2018 in just a few short months.)

With a percentage so small, it would not even be proper to consider it a decline. It is also important to keep in mind that, while these auctions have great influence in the world of investing, they only account for a fraction of sales for precious gems and jewelry throughout the world.

Argyle Diamond Influence on the Diamond Industry

The Argyle mine has significant influence on the diamond market. Being one of the most influential mines in the industry, it does not only provide 90% of the world’s pink diamonds, it also produces diamonds with a pink hue so unique, it is unrivaled by any other.

argylemine-1-1Source

2017 marked the highest price average ever achieved during the Argyle Tender’s 33 year lifespan. While information regarding selling prices, owners etc, is not disclosed by Rio Tinto, there could be a few reasons behind this record setting year.

Firstly, 2017 featured some pretty impressive Hero Stones (the tender’s top lots) including the Argyle Everglow, a beautiful 2.11 carat Fancy Red diamond that was not only the largest red diamond the mine has ever produced, it was also the most expensive stone to have ever been sold at the tender.

Pink and red Argyle diamonds.png

The second reason could potentially be that the number of private investors and collectors has been increasing. The tender’s attendance is on an invitation basis only, so by increasing the number of affluent and competitive investors willing to offer more than other dealers invited, it can play a major role in driving average prices.

The final reason might be the finite nature of the Argyle diamonds. In a statement by Rio Tinto, it is estimated that the mines resources will soon be depleted, and the mine is expected to cease operations around 2020. For more insight as to how the closure of such an influential mine can potentially affect the diamond and investing industry, you can read more with the link below:

 

Diamond Industry Outlook For Beyond 2018

No matter what anyone claims for the remainder of 2018 and beyond, the unfortunate truth is that nobody can accurately predict what is going to happen this year. What we can do however is use past experiences and logic to speculate.

Seeing that this industry is among the few that have yet to be fully explored, it is safe to assume that the maximum investment potential has yet to be reached. The key to achieving this lies in education. 

The more investors are educated on the potential hidden within colored diamonds, the more likely they will be to invest in the market. In turn this will also benefit the value chain from mining companies, to diamond polishers, to jewelry manufacturers, creating an overall positive atmosphere in the market.

This positivity will then attract even more investors to increase their spending, ultimately causing a prosperous cycle.

Just take a second to think of how much investors currently put into gold and other assets, what would happen if that was replicated in the diamond industry? Undoubtedly it would be enough to invigorate it as a whole.

But again, this is nothing but speculation. What are your thoughts on the evolution of the diamond industry? Are you optimistic? Let us know! And as always feel free to follow us on Twitter and like us on Facebook.

For more insight on the world of colored diamonds be sure to check out the links below:

 

 price of colored diamonds

 

 

Topics: Alternative Investments, colored diamonds, Colored Diamond Investment