Investment Trends: Investment Diamonds and Luxury Goods Portfolios

With diamond prices having increased 30% over the last five years, and predicted to increase an additional 10-20% by the end of 2005, investment consultants are at last taking notice of diamonds as a lucrative and safe investment, with a better guaranteed return than gold. Another big increase, diamond dealers say, could come now that China has revalued its currency. Since diamonds are priced in dollars around the world, a stronger yuan will make the jewels more affordable for Chinese consumers and more attractive as an investment. Heightened demand in China could push up global diamond prices further, with some industry analysts predicting another 100% increase over the next 5 years.

Leading jewelry designers such as Michael B, David Morris, Daniel K and Carl Blackburn have capitalized on the desire for large investment quality diamonds by featuring what has been called the “Halo-Effect” in their ring designs. This large center diamond look is punctuated by a center stone of greater than 1 carat, surrounded by streams of micro-pavé diamonds.

Carl Blackburn has seen a huge increase in ring mounting sales this year, especially in the mountings for stones 3 carats and up, where the customer is looking for a ring that represents the best quality that money can buy. The Beverly Hills designer describes these new diamond investors this way:

“Consider a Limited Edition Platinum Patek Philippe watch, which a gentleman might buy and put in his safe to keep as a long-term investment, but also will want to take it out from time to time to wear on his wrist for very special occasions or social functions. In the same way, a woman is now buying or receiving a very expensive diamond as an investment gift to keep in her safe, but instead of just keeping this large diamond in her safe deposit box, never to be seen by anyone, she also wants to have it mounted in a very fine platinum ring, so she can take it out and wear it for special occasions and society events.”

Of course, buying diamonds as an investment flies in the face of traditional wisdom, which always warned about ever buying diamond jewelry as an investment due to the many incremental markups that occur in a diamond’s journey from mine to retailer. But that was before the internet leveled the playing-field dramatically, with online companies like Diamonds-USA now offering certified large carat diamonds to enhance “personal investment portfolios”.

The potential for gains has become so strong that Tongjai Thanachanan-Marion of Thailand’s Ayudhya JF Asset Management now recommends that her affluent investors dedicate up to 20% of their portfolios in luxury goods such as gold, diamonds and the like, stating: “This asset class can be a smart choice for long-term investment.”

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