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Investing In Color Diamonds

Investors in today’s market are looking for the right opportunities in which to invest in the hope that they will bring abundant returns. Although no one can predict the future, we all have the capability to focus on the solid facts available which are based on any asset’s past performance and current market demands.

Unfortunately, the more conservative stocks and bonds don’t produce the results today that other asset classes potentially hold. Furthermore, some of the more popular alternative investment opportunities available are not tangible and subject to many constraints which make them less attractive. The upward trajectory of fancy color diamond prices over the past few decades has been interrupted infrequently by very minor corrections. Even during the Great Financial Crisis of 2008, fancy color diamonds outperformed almost every other asset class.

However, the best way for one to objectively quantify which investment opportunities have exhibited the highest returns in comparison to all other major assets in the market is to compare them. Here we describe which points to focus on in order to present the results of our comparisons.

Comparing the Most Common Assets in the Market

Since our goal was to bring relevant and accurate data to our readers, we made sure to focus on the very same topics your everyday average investment seeker may investigate. We first noted what we felt the most traditional and alternative investment options may be. After many comprehensive hours of research, we managed to collect ROI statistics and the historical price performance for bullion, precious metals, major currencies, U.S. inflation, general stocks & bonds, colorless diamonds, and of course natural fancy colored diamonds.

After assessing the information we acquired, we compared the most relevant topics to one another, and to be perfectly honest were actually pleasantly surprised with the results.

Although, Leibish & Co. has been in the trade for a long time and fully acknowledges the investment potential that colored diamonds hold, it was exciting to see how well colored diamonds performed compared to other major asset classes. As a result of their rarity, natural colored diamonds are quite different than any other asset in the market. However, in order to prove the potential we needed to come as close as possible to a comparison of apples to apples, so to say.

Colored Diamonds Compared to Other Assets such as Precious Metals, Stocks, and Currencies

In order to ascertain what the most common investment trends are, as well as acquire their historical price performance, one can simply browse through the most popular financial websites. However, none of the websites we found presented a graph that compared the data between one to another.

In the following graph, Leibish & Co. presents Fancy Intense Pink Diamonds larger then 3.00cts, Fancy Intense Yellow Diamonds larger then 5.00cts, a 1.00ct colorless round diamond, US inflation, Gold, the Dow Jones Industrial Average, Platinum, and $ per Euro over a 12 year period since the very beginning of the 21st century through to 2012.

Data to be understood from the graph above includes the following:

  • Prices paid for Fancy Intense Pink diamonds larger than 3.00 carats have appreciated in a consistently straight path over a 12 year period, with a 443% gain
    • In 2003, a 3.58ct Fancy Intense Pink Pear shaped stone was sold for USD115,000/carat
    • By late-2007, a 3.86ct Fancy Intense Pink Oval shaped diamond was sold for USD390,000/carat
    • In late-2010, a 4.59 carat Fancy Intense Pink was sold for an amazing  USD625,000/carat 
  • Prices paid for Fancy Intense Yellow diamonds larger than 5.00 carats showed an impressive 350% appreciation between the years 2000 and 2012.
  • Although other assets have improved, and some significantly over the period of time, none can compare to the performance of colored diamonds.

Diamonds to Diamonds – The Appreciation of Colored vs. Colorless

Almost every woman you know wears a diamond ring on her finger, and most have become quite acquainted with the basic information required to asses a stone, the 4Cs. However, how many of those consumers have looked into the past price performance of these stones? Leibish & Co. therefore collected the data from the Rapaport Report, which is the jewelry industries standard for the pricing of natural colorless diamonds. We then put the numbers to the test.

The chart below compares the increase in price over the course of 5 and 10 years of Colorless stones and Fancy Color Diamonds. The stones compared were:

  • 0.50ct Colorless Round compared to a 0.50ct Fancy Intense Argyle Pink
  • 1.00ct Colorless Round compared to a 1.00ct Fancy Yellow
  • 3.00ct Colorless Round compared to a 3.00ct Fancy Light Pink

As one can clearly see, the difference between the two is quite drastic:

While the 0.50 carat Colorless stone had a price increase of only 10% over a ten year period, which is a respectable appreciation, the 0.50 carat Fancy Intense Pink Argyle diamond had a 375% price increase over the same period.

The 3.00 carat colorless diamond showed a 130% incresae over the 10 year period while the 3.00 carat Fancy Light Pink diamond appreciated at 318% during the same period. Even the 5.00 carat colorless stone, which showed the highest increase of colorless diamonds over a ten year period of 159% could not compare.

The charts above provide empirical proof that over a twelve year period, fancy color diamonds display much stronger performance characteristics than any of the other major alternative investments in the market.
 
Economists in today’s volatile market are searching for a balanced risk vs. ROI. People prefer tangible investments that help protect against inflation and alternative paper assets. Hard asset commodities such as Gold and Platinum have been a successful venture over the past several years but have also shown extreme volatility. Furthermore, as a paper commodity it is difficult to move, cannot be concealed, and directly connected to the credit markets and other paper assets like ETFs or other such funds.

General Advantage Points


Natural fancy colored diamonds are internationally recognized well established goods. They are extremely portable, and therefore easy to transport from one place to another. They have shown an impressive long-term price growth and serve a multi-function asset class as beautiful diamond jewelry and great investment pieces alike. They demonstrated excellent value retention and are an extremely private asset.


Rarity


Colored diamonds are among the rarest natural gemstones on earth. Only in various different mines around the world are colored diamonds found, and even those are only produced less than 0.1% in comparison to colorless stones.


Diamonds found in Rio Tinto’s Argyle Diamond Mine, for example, are globally recognized among the world’s finest diamonds. They are so rare that it is known as one of the most valuable and investment worthy stones in the market.

Market Demand


In the 20th century, it was almost unheard of to source a natural colored diamond, and therefore it was only the most rich or famous individuals that purchased these products. However, with time the manufacturing process improved, the Internet opened marketing and exposure of the product, and more of the general public showed keen interest to colored diamonds. Furthermore, when the most famous celebrities began displaying their colored diamond jewelry in public, colored diamonds were quickly adapted to the most common fashion trends.


Price Performance


Since colored diamonds are such a private asset the only way to accurately measure the public price performance is from the realized results of the world’s largest auction houses, Sotheby’s and Christie’s.

Since 2007, over 15 price records have been broken all by fancy colored diamonds, such as “highest price per carat ever paid at auction” and “highest price paid for any diamond and any jewel sold at auction.”

Conclusions


Fancy color diamonds are the most concentrated and portable form of wealth on the planet. They have proven themselves over time to be the strongest asset class around. They have outperformed all other major assets including stocks, bonds, gold, silver, and platinum. Colored diamonds, simply put, offer much greater potential results than other investment opportunities.

However, as it is more difficult to liquidate than other more common investments, it is important to understand that colored diamonds should only be considered for long-term investments. Similar to an exquisite piece of art, finding the buyer may be more difficult and take more time, but the potential returns will be appreciated. Fancy Colored Diamonds exhibit characteristics that any other asset class can only dream about emulating.

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