Friday, April 20, 2012

Diamond as an Investment

Diamond is chemically a form of carbon which occurs naturally. The natural occurrence of diamond is quite scarce due to certain chemical properties. Due to this, diamond is a sought after commodity. The popularity of diamond investment has increased over the last few decades due to increase in it prices. Diamond has provided more stable returns over the long run compared to other markets such as Stock markets. The volatility of diamond returns are significantly lower than that of other asset classes. This is due to the fact that Diamond prices are largely controlled by certain big groups such as De Beers. The diamond cartels have worked out in favor of diamond investors. Diamond has its application both in jewelry and industry. The industrial usage of diamonds reinforces the fact that diamond is a good avenue for investment.

Diamond investment may not be suitable for everyone. To achieve full returns of price appreciation in investments, the investor has to buy the right kind of diamond and hold it for considerable time. Diamond is a also a relatively illiquid commodity and it may be difficult to find buyers during economic downturns. This shuns most of the investors into other asset classes such as Gold. Hence, it can be safely assumed that diamond is relatively undervalued compared to other bullion metals such as gold and silver. It is always recommended to seek professional advice before venturing into diamond investment. The properties of diamond have to be evaluated. The color of the diamond which ranges from D-Z is one of the parameters to be considered. A color D diamond will be perfectly colorless and command a high price. For investments, diamonds in grade of G-M are recommended. The carat of the diamond usually refers to the weight. It is also worthwhile to consider the threat posed by synthetic diamonds. It is always recommended to buy graded diamonds for diamond investment. Other specifications such as Shape, Clarity, Cut, Color, Carat etc are of prime importance which might impact the prices. It is always recommended to buy graded diamonds for diamond investment. It is recommended to consult experts before deciding on the carat and other specifications before investing.

Most of the diamond supply comes from African countries such as Botswana. Certain diamonds which originate from Africa are termed as conflict diamonds. It is always recommended to never buy these types of diamonds for investment. There have been some developments in diamond investments. Diamond circle capital was established as a close ended investment company which invests exclusively in rare colorless diamonds with a value of at least USD 1 million each. Antwerp in Belgium is a huge hub for diamond trading. Journals published with these statistics have a significant impact on diamond prices. China has emerged as the second largest diamond buying nation. The sales at Shanghai Diamond exchange exceeded USD 2.8 trillion in 2010. The demand for diamonds in China is fueled due to both the domestic and sovereign use. The Chinese have increasingly been buying investment grade diamonds which are usually about 2 to 20 carats in weight.