Demand for Colored Diamonds Surges as Investors Join The Fray - WSJ
January 16, 17
(IDEX Online) – A report in the prestigious Wall Street Journal looks into the investor interest in colored diamonds as a result of extremely low returns on a range of other investment options.
High-price purchases of colored diamonds by investors have become more commonplace in recent years as "part of a boom in niche over-the-counter luxury markets that were once the preserve of wealthy collectors", the paper reports.
Prices are being driven higher by investors disappointed by returns from other assets. From the start of 2009 to September 30, 2016, the latest recorded data, the price of pink diamonds has increased nearly 180% and sits at a record high. Blue and yellow diamonds are up by around 70% and 90%, respectively, over the same period, according to the Fancy Color Research Foundation, based in Tel Aviv, says the report.
Interest in colored diamonds, as with other luxury markets, is due to extremely low interest rates which have pushed returns on many government bonds below zero. Top-end vintage car prices have increased nearly 460% in the past decade, while classic wine prices have risen around 240%, according to the annual Wealth Report published by London-based property broker Knight Frank. Prices of colored diamonds, the report adds, have risen 122% in the same period.
Professional investors and funds typically invest on behalf of wealthy clients, and buy the stones outright or in partnership with other investors.
There has “absolutely” been a growth in the number of investors buying colored diamonds, said Eden Rachminov, managing partner of Tel-Aviv-based Rachminov Diamonds. Soaring prices have drawn in some investors, he says. “The price of red diamonds is very high. That creates an attraction.”
Although colored diamonds selling for record auction prices in recent years have made the headlines again and again, Rachminov commented that just 12% to 15% of deals are done at auction, with the rest being private sales or tenders, making it hard for investors to gauge a stone’s market price.