December is the month of gifts. Despite the agitation, the stress, and the exhausting shopping session after the gifts, December remains a special month. Also this month, we make the retrospective of the year and prepare for the coming year.
If we think in terms of investment, maybe it would be time to think of a different investment for 2018.
What alternatives do we have for classic investments?
“A diamond is forever” according to the De Beers Group’s slogan
De Beers is one of the world’s largest diamond mining and extraction companies. Founded in April 1888 by Cecil Rhodes, under the name of De Beers Mining Company, during South African Diamond Goan, today the company controls a large part of the world market for rough diamonds as well as important percentages of the world’s metals market.
Although diamonds aren’t nearly are rare as the majority of people believe, they are without question the hardest of all gemstones. Diamonds are forever because of their unique qualities. Yet how did they become the symbol of wealth, power, love and devotion?
The answer lies in the unique chemical structure of a diamond. Everything on the earth is made up of atoms and hardness depends on how closely the atoms are held together. Diamonds have incredibly strong bonds because they are made up of carbon. Being the smallest of the atoms that can be bonded, carbon fits in more tightly together with other atoms, making a hard and compressed substance.
And best of all, once these atoms have been compressed at high enough temperatures to make a diamond, they are literally stuck there forever. Therefore, the phrase “diamonds are forever” is more than just a catchy marketing slogan. It’s because diamonds quite literally are, forever.
Because of these unique qualities, diamonds are an ideal investment nowadays if we have the necessary financial resources for such an investment.
Evaluation of diamonds
The system of the four C-Color, Clarity, Carat and Cut was established in the 1950s by the Gemological Institute of America (GIA) and is accepted as such by gemologists and businessmen.
The color of diamonds is expressed in letters on a descending scale from D to Z. A perfectly colorless diamond is marked with D, and from J diamonds are perceived as yellow. If the value of diamonds drops considerably from H to Z, the Z plus diamonds are extremely valuable.
Returning to investments…
The world diamond market is represented by diamond mining and trade in rough diamonds. The bulk of the world diamond mining is concentrated in nine countries, with their share in the global production in physical terms as high as 99%. The world’s largest producers of natural diamonds are Russia, the Democratic Republic of Congo (DRC) and Botswana, all together accounting over 60% of the global diamond production.
Global diamond supply remains dominated by the two majors, De Beers of Anglo American and Alrosa of Russia. World production is then supplemented by several other mining companies, including Rio Tinto Diamonds, Dominion Diamond Corporation, Petra Diamonds, Gem Diamonds and Lucara Diamond Corporation.
About 96% of the global diamond production in value terms falls to the share of the market’s leading countries. Top positions as per the cost of produced rough diamonds belong to Russia, Botswana and Canada with the cumulative production exceeding 60% of the world’s total.
Russia ranks first in the world’s diamond production. ALROSA Group accounts for 93% of the total diamond production in the Russian Federation in physical terms, and it is the leader of the global diamond mining industry. Major mining companies are engaged in mining in the main diamond-producing countries, the exception being Zimbabwe and the DRC, where diamond deposits are developed by small companies and prospectors.
In 2017, the global demand for rough diamonds was expected to be around 22 billion U.S. dollars. Until 2020, this amount is expected to increase up to 26 billion dollars.
Diamonds are a good alternative for investors and are suitable for investment portfolio diversification. Buying a diamond is a suitable alternative investments for many reasons, even when you have a smaller amount to invest.
Over the past 30 years diamonds were found to withstand economic and financial crises.
Prices continue to grow on the global market. This is quite logical, as the demand from BRIC countries and emerging economies is on the rise, but the diamond supply does not increase because the diamond mines are strictly controlled.
In addition, given the continuing growth in demand, investors simply redistribute their investments and thus ensure a good return.
Investments in rough or polished diamonds
A rough diamond is more accessible than a polished diamond, it’s true. A rough diamond that has been bought in the right way has the potential to be very profitable, but it also has higher risks. When assessing a rough diamond, it is difficult to determine the quality and value of the diamond. Also, a high level of experience is needed to get the clarity and color of a rough diamond.
At the same time, rough diamonds lose about half of the carat’s weight during the cutting process. Polished diamonds, on the other hand, are easy to evaluate and do not risk losing the weight of the carats. So if you are not an expert in diamonds or if you want to build a rough diamond portfolio, it is better and safer to invest in polished diamonds.
How do we buy diamonds?
There are three main ways for investors to buy diamonds: investing directly in diamonds: buying the gems and storing them to sell at a later date; buying the shares of diamond mining companies; or investing in diamond funds and tax-efficient investments.
Holding physical diamonds is a popular way to invest in diamonds because people can wear their investment if they set the diamonds into jewellery.
Investors can find out pricing and trade at Rapnet, the world’s largest online marketplace for certified diamonds.
As far as Romania is concerned, we can talk about diamond stores or specialists in design and processing of diamonds. The diamond market in Romania is still underdeveloped, but it can be noticed that the sale of jewels with diamonds and precious stones acquires consistancy every year.
Our advice: Any investment involves risks. All you can do is try to make a smart one based on all of the information you can obtain.