Nov 29 2011
Diamonds Today
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The price of a diamond is as much as the story behind it.What once was a simple gold band for weddings now came with diamonds embedded in them. Sentimental value adds value to this beautiful stone. Possibly because of how the buyer acquired it and the financial straits said buyer went through just to acquire a diamond as investment .
Diamonds used to be a rarity. Back in the day, De Beers used to be the only company that sold real diamonds after World War II. A diamond’s rarity has gone down significantly because of the amount of competitors De Beers has now. Add that to the “buy high, sell low” market that diamonds have, a diamond is a great investment. However, diamond stud earrings still sell at a pretty penny more than any other stone because of how it is acquired.
The real problem causing the diamond market’s price hike is the lack of replenishment for where diamonds can be acquired. Diamond mines are limited, making the stone more difficult to get. This means that diamond companies raise the price according to the output that they produce. Retail buyers cannot expect the same value for their pieces, however, since diamonds sell for only a fraction of its original price when taken to a jeweler’s.
The absence of new diamond mines means diamonds are expected to get more expensive in the coming years. Clearly, supplies going down means demand for studs diamond earrings going up. Diamond producers increase the price of diamonds according to how many are available for them to produce. Regardless of diamond supplies running low, demand for the rare stone is still increasing. Both rough and polished diamonds increase in price with rough diamonds commanding more cost than polished ones.
This of course puts diamond cutters in a tight spot. Since unpolished, uncut diamonds fetch a higher price in the market, diamond cutters and manufacturers might find their businesses seeing an all time low. This does not put them out of business, however, since polished diamonds are still sold at a higher price in the world diamond market. This forecast might mean that opening a diamond cutting facility will not be as profitable as simply distributing or investing in the world diamond market’s stock.
Forbes.com reported that China and Southeast Asia have been more competitive in the diamond market lately, since 5% of polished diamond jewelry are bought by China.50% of the major purchases come from China and Southeast Asia, says Brian Mennel, chairman of Special Situation Diamonds in London, in an interview with Forbes’ Russel Flannery. However, in the same interview, the forecast for China investing in diamond mining looks vague. 45% of the mining and distributing end of the market still belongs to De Beers.
Whether you are selling, buying, or investing in stocks that involve diamonds, it is always best to look at each year’s future forecast for the product. As De Beer’s campaign slogan goes, “Diamonds are forever.” But keep in mind that an investment does not last as long.
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