Diamonds are the world’s best friend

Philip Salter
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FOR obvious reasons, most women don’t look upon their engagement ring as an investment – at least not in monetary terms – but diamonds can, and perhaps should, also be valued for their present and potential future value.

Diamonds are tangible, portable assets, highly concentrated in value, which offer a great opportunity to protect investors’ wealth says Monica Bortolin-Cossa, managing director of MBC Diamonds.

In recent years the price of diamonds has been rising. Much of this has been a rebound from the latest crash, but even after recovering, prices have continued to rise. “In 2011 the price of diamonds rose by up to 30 per cent”, notes Bortolin-Cossa. Salim Hasbani of Hasbani UK and Tresor Paris says “in general the price of diamonds has been on an increase, with sizes from 3 to 4 carats in the D to G colour and Vs+ (very slight inclusions) gaining the most – some 30 to 40 per cent increase in prices over the last two and half years.”

Hasbani says the economic downturn has driven prices up as wealthier clients have opted for investing in precious commodities: “The high value of diamonds and its very low weight make it a much easier commodity to transport, also the loss of trust in financial institutions made diamonds a more attractive option.”

Perhaps unsurprisingly, most people in the diamond trade are bullish. Vania Leles of VanLeles Diamonds thinks “prices will only go up massively” because supply can’t cater for demand.

Like all bets on future prices you will have to take the rough with the smooth. Bortolin-Cossa says prices crashed in the Great Depression in 1929, which of course started with the crash on Wall Street; they also tumbled after the dramatic collapse of 2008. On the latter event, Vashi Dominguez, the founder of explains that “prices almost halved from October 2008 into 2009 as a result of the credit crunch. Many had to liquidate their holdings and crystallised large losses.”

But Dominguez adds: “By 2010, the diamond industry was at around 80 per cent of the previous level of activity, and by 2011 prices were level with pre-crash prices. They then continued increasing even further, partly thanks to the increased demand for diamonds in fast emerging diamond markets like China and India.”

Many people claim that diamonds are intrinsically valuable; this is nonsense. Diamonds – like everything in this world – have no intrinsic value. It’s all about context. A man dying of thirst would likely swap a diamond as big as the Ritz for a glass of water. A story from the early Middle Ages by St Hildegarde tells of the use of diamonds to cure illnesses. Pope Clement and others swallowed diamonds; presumably, they assumed that something so valuable was bound to help. The cure failed disastrously.

Today, if they weren’t considered beautiful, gem-grade diamonds would be worth no more than industrial-grade stones. And it should never be forgotten that fashions may come and go. Jean Ghika of Bonhams explains that “the most desirable stones in today’s market are fancy coloured diamonds (particularly blue and pink) – however, only 100 years ago these were considered a curiosity and certainly did not exceed the value of colourless diamonds in the way they do today.”

Bortolin-Cossa explains that “expert investors spread their risk through various investment products so that they can provide greater stability and growth.” She says the same applies to diamond investments: “The investor should hold a diversified diamond portfolio that will include a variety of diamond qualities and sizes, both in the white diamond family and in the natural colour diamond family.”

Also, diamonds can’t be seen as a short-term investment. As Dominguez explains: “Buyers should be aware that VAT is levied at 20 per cent on all retail purchases, and cannot be reclaimed when sold on, making it a disincentive to casual buyers hoping to make a profit.”

But whatever their carat, colour, clarity or cut, for the foreseeable future, the public’s love of diamonds looks set to remain as durable as the gem themselves.