Geological classification

Is it possible to invest money in diamonds?

There are fewer and fewer people in the world who distrust the word “investment”. And more and more people are thinking about investing and passive income in the future. Most often, shares, precious metals, currencies, and real estate are purchased as assets. Less often – antiques, objects of art. And only a few people think about investing in diamonds. Completely in vain! For many centuries, literate people have considered jewelry as an investment in the future, if not their own, then their descendants. And the safes store not only currency, but also magnificent necklaces, earrings and rings with luxurious stones. So, when buying jewelry, keep in mind that diamonds are an investment that will most likely pay for itself many times over. True, there are nuances.

Which diamonds make sense to invest in?

  • Weighing at least 1 carat. Some experts recommend investing in stones weighing 3 carats or more.
  • With high levels of purity. As a rule, this parameter is assessed using the GIA system. The Russian system has its own classification: the clarity of a diamond from 0,3 carats is assessed on a 12-point scale. The higher the number, the lower the purity. The ideal range is from 1 to 5-6. It falls within the GIA range of IF to VS2. You can read more about the purity of stones in the article “Diamond Purity.”
  • Colorless or with an imperceptible yellowish tint. This corresponds to a GIA color rating of D to G. In the Russian color classification, the characteristics of stones weighing from 0,3 carats are assessed on a 17-point scale. Colorless or almost colorless stones occupy a range from 1 to 4. We talked more about color in the article “Diamond Color”.
  • With a perfect cut. In this case, the shape of the cut is not decisive – only its quality. Although, it’s worth remembering that round diamonds with 57 facets are traditionally more expensive. The GIA system offers a 5-point grading scale for cut quality. GIA investment stones must be graded EX (excellent) and VG (very good).

Painted stones occupy a special position. Investing in colored diamonds can make a fortune over time. Especially if these are rare stones of fancy shades. It is worth remembering here that one of the factors for the high price is rarity and scarcity. According to statistics, for every 10 thousand carats of colorless stones, only 1 carat of colored stones is found.

The most important thing is that the stone has a certificate. This is a diamond passport, a document issued by experts confirming its authenticity and compliance with the declared characteristics. You need to remember: a certified diamond always has advantages over an exactly the same, but uncertified one. Including price. And one more nuance: in Russia, the purchase and sale of uncertified stones is illegal and faces criminal liability.

Now let’s take a closer look at investing in diamonds – the pros and cons. Let’s start with the first ones.

Pros of investing in diamonds

There are many reasons to consider diamonds as an asset. Investing in them is both profitable and convenient. That’s why:

  • Low volatility of the asset. Prices on the diamond market do not fluctuate; they are growing steadily.
  • Guarantee of reliability and return on investment – follows from the previous paragraph.
  • Anonymity of purchase and, as a consequence,, investor safety. The real one, and not the one that happens with crypto wallets.
  • No need to pay taxes like when owning other assets – for example, real estate, cars.
  • Ease of asset valuation, complete and clear control over the investment. The more carats a diamond has, the more expensive it is. It couldn’t be simpler.
  • Inflation protection. Stones are not getting cheaper.
  • Easy to transport. But there are nuances regarding customs rules.

And the main plus for today is that diamonds will continue to rise in price. According to Rapaport for 2022, prices for these stones increased to 13%, and a year earlier – to 30%. The cost of pink diamonds has risen by 350% over the past decade. What deposit or shares can boast such results, especially in the long term?

Cons of investing in diamonds

Alas, there are no ideal assets, otherwise we would all be billionaires. Of course, “diamond investments,” like any other, have their downsides.

  • High entry threshold. The price for diamonds weighing 1 carat starts from 255 thousand rubles. A diamond with impeccable characteristics will cost $10 or more.
  • Lack of clear concepts of sales and purchasing, in contrast to classic assets: securities, gold and others.
  • Tangible costs of maintaining and storing the asset – for example, in a safe deposit box. Even a reliable home safe will cost a pretty penny.
  • Relatively low liquidity — you won’t be able to sell a diamond quickly and at a high price.

Where to buy diamonds for investment

So, the decision is almost made. Procedural issues remain. For example, where to buy investment diamonds.

The option that immediately comes to mind is purchasing stones in retail jewelry stores. Not the best and not the most rational solution: the price of the stone includes a lot of the seller’s overhead costs plus intermediary commissions.

Another option is to buy from private individuals “by advertisement”. There are many minuses and not a single plus. In addition, this is illegal in our country and threatens criminal liability.

Reasonable options: buying diamonds on specialized exchanges, directly from the manufacturer and its dealers, at auctions. Let us remind you that about 30% of the world’s diamond production comes from the Russian company Alrosa, a miner and seller of the famous Yakut diamonds.

The situation with investing in diamonds in the coming years

So, you are mentally prepared to become the owner of a luxurious, large, transparent diamond, but, due to recent events, you are slightly feverish from the prospects. Indeed, now it is generally customary to think about investments with caution, let alone investing in such a controversial asset as precious stones.

But we hasten to reassure you: diamonds are not an instrument that, unlike stocks, currencies, bitcoins and precious metals, will become cheaper. Well, if only a multi-ton meteorite falls to the ground in the form of a solid high-quality diamond (but then all the inhabitants of the planet will definitely have no time for investment). Or someone will discover a new continent, entirely consisting of rich diamond mines. But this is hardly possible. In the meantime, the price of diamonds is steadily growing by tens of percent annually, deposits are being depleted, and no new mines are expected on the horizon.

Diamonds are not just a gift

What do men want when choosing a diamond ring or a sparkling pendant for a loved one – sister, mother, spouse or beloved woman? Of course, bring her joy, tell her about your feelings, make her understand how dear and important she is to us. But remember where we started – family safes in which money is stored and passed on by inheritance, and, along with them, precious jewelry that never ages, always grows in value and can bring a fortune over the years. This means that your gift today – earrings or a ring with diamonds – is not just a beautiful thing, but also a solid investment in the future of your loved one.

Since the beginning of 2022, prices for diamonds of different weights, according to Rapaport, have increased by 7-13%, and the gem market remains in high demand amid a global shortage of rough diamonds. Forbes Life learned from representatives of jewelry companies why diamonds are a win-win investment, how prices for precious stones change and whether it is worth selling them now

Investing in gemstones is always a good decision

Precious stones have high liquidity and a transparent pricing policy; the cost of diamonds is regulated by the Rapaport Diamond Report weekly price list. This makes gemstones a profitable investment.

In addition, unlike gold, diamonds are compact, mobile, undemanding to storage conditions and have low price volatility. “They also do not require registration of ownership, have the potential to increase in value in dollar terms and can form the basis of jewelry,” adds a representative of the Russian diamond mining corporation ALROSA, which occupies a leading position in the world in terms of diamond production. ALROSA itself also offers its investors not only diamonds with high investment potential, but also the opportunity to sell them back at the company’s regular auctions.

According to Maxim Artsinovich, a businessman, jeweler and head of the jewelry company Maximilian-London, investing in precious stones is “some kind of attempt to remove some amount from the radar.” After all, if you own precious stones, you can, as a last resort, hide them in a safe. Precious stones, as noted above, do not have a documented transfer of ownership. There is only an invoice according to which the buyer purchased the goods from one company or another. It turns out that precious stones act as invisible assets.

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How are diamond prices changing now?

In 2021, prices for colorless diamonds increased by 30%, according to the Rapaport price list, for Burmese rubies and Colombian emeralds – by almost 100%.

“In 2021, prices on the diamond exchange rose at least eight times. By December, the cost of cut diamonds reached pre-Covid levels. We can state that for our investors who invested money in precious stones as an alternative investment, we earned 25% per annum,” says Maxim Artsinovich.

Even despite the pandemic, in both 2020 and 2021, prices for colored diamonds, rubies, sapphires, emeralds with special origin, color and clarity – rare collectible stones – grew by approximately 10% per year. This trend appears to be continuing. Since the beginning of 2022, indicative prices for diamonds weighing 2-3 carats have already increased by 13%, and those weighing 0,3-0,5 carats – by 7-11%.

“This is dollar yield, while settlements in specific transactions can be carried out in national currency at the current exchange rate. Therefore, in today’s situation, when many are looking for an alternative to investing in foreign currency, investing in diamonds is one of the most attractive options,” explains an ALROSA representative.

Yunna Alieva, gemologist, expert at Parure Atelier, is convinced that in crisis situations the value of conservative assets, which are diamonds and precious stones, always increases. Changes in price are influenced by both geopolitical factors and the internal economic situation in Russia.

As for the change in exchange rates in Russia, it does not affect the precious stones market in any way. “On the one hand, Russia is a large part of the world economy, and the state corporation ALROSA sells $5 billion worth of raw materials, that is, uncut diamonds, per year. But due to the fact that the ruble exchange rate has changed against the dollar, prices have not changed,” – says Maxim Artsinovich.

In his opinion, sales of precious stones in Russia may decrease by 5-10 times due to a “military special operation”*. But this will not affect the whole world in any way, because the volume of the market, for example, for cut diamonds in Russia is no more than a billion dollars, while the world market for cut diamonds reaches $80-90 billion. “We occupy 1-1,5% of the world market for the sale of cut diamonds, the market is unlikely to feel anything,” Artsinovich concludes.

At the same time, Yunna Aliyeva warns that diamonds and precious stones have a currency value, and this does not depend on the country of production. So for the Russian consumer, the volatility of the ruble leads to an increase in the cost of jewelry.

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Why you shouldn’t sell gems now

Dmitry Mokrinsky, founder of the Russian jewelry brand Parure Atelier, is convinced that now is the right time to invest in stones, since there are no prerequisites for their value to fall. “To avoid any difficulties with the logistics of precious stones, it is important to contact professionals who have regular deliveries and their own logistics department, which allows them to quickly respond to market changes. At our Parure Atelier, logistics for customers have not changed at all. We have only slightly increased the delivery and production time for new orders – on average by 7-10 working days. Customers will receive all orders placed before the “military special operation” in Ukraine on time,” assures Mokrinsky.

Of course, the issue of exiting any investment, ALROSA representatives emphasize, is an individual matter. However, according to experts, the potential for further growth in world prices on the precious stones market will remain. This is due to strong global demand for diamond jewelry, including in those countries where a market economy is developing and the supply of diamonds is limited due to the depletion of known deposits. True, this does not apply to Russia, since it is the largest diamond producer and the largest polished diamond producer in Europe. It is distinguished by high quality products with increased investment potential. So, ALROSA assures that the delivery of diamonds across Russia does not depend on the state of global logistics: “Russia has all the key links in the diamond value chain. The Russian ALROSA is the only full-cycle diamond company in the world, which combines all stages: from diamond mining to cutting and creating jewelry. So the influence of the external geopolitical background on the domestic diamond market is mainly due to the exchange rate.”

Maxim Artsinovich also says that now there is no need to panic and sell precious stones: “Stones will survive any revolutions, wars, changes in political regimes, financial systems, and so on. Everything will change, but the stones will remain.” For people who want to preserve their capital in such an unstable period, Artsinovich, like other market experts, advises not to sell such a good asset as precious stones, but, on the contrary, to buy more if there is free money.

However, it is worth keeping in mind that you can make money on investments in precious stones only if you are a direct participant in the market, reminds Yunna Aliyeva. However, jewelry in any case allows you to save cash from depreciation.

“When choosing jewelry, you should definitely pay attention to the availability of certificates from gemological laboratories confirming the characteristics of the stones,” notes the Parure Atelier expert.

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