Just last week, The Financial Times shared an article as to why luxury clients are investing in fine jewellery and diamonds during the turbulence of a pandemic. Journalist Vivienne Becker expressed that as uncertainty erupted across the globe, jewellery showed signs of reverting to one of its most essential roles – being a store of wealth in times of crisis and a safe haven for investors. Echoing this sentiment, we recently shared an article explaining the potential of investing in alternative assets during a crisis and global economic turbulence. Investing in fine jewellery and diamonds have the potential to be a rock-solid investment.
However, when it comes to studying the potential of investing in fine jewellery and diamonds, one notable opportunity are pink diamonds – which have received notable media attention. As an investment asset class, the annual rate of return for the past 15 years has been reportedly in excess of 15% p.a. (Wealth Partners). According to Precious Gem Investment PLC, pink diamonds have significantly outperformed all traditional asset classes. Since 2005, pink diamonds has had a total growth of 366.2%, outperforming gold (247.7%), international bonds (157.2%), cash (77.5%), silver (164.8%) and international shares (183.7%).
This performance has been dependent on varying factors, with market fundamentals on both the supply and demand side suggesting this period of strong performance will continue in the years ahead – especially as we look to the future in 2021 and the forecast closure of the Argyle Diamond Mine by Rio Tinto means the global supply of pinks will be cut by over 90%. As a result, the value of the diamonds are expected to increase as there are no other consistent sources of pink diamonds. Even if another deposit of pink diamond-bearing ore were to be discovered, there is an average of 10 years for a mine to create the diamonds from discovery to production (Argyle Diamond Investments).
However, it is worth noting that when it comes to pricing, the origin of Pink Diamonds makes a significant difference to an investor. According to the Christie’s Auctions, a Fancy Intense Pink Diamond from the Australian pink diamond mine will fetch a 30% premium over a Fancy Intense Pink Diamond with the same colour and clarity from another location.
In addition to this, the FCRF has shared that natural pink diamonds without Australian certification have only increased in value by a mere 1% in the past five years and it was only in 2019 that that 1% growth happened. When we compare this statistic to the 18.6% average increase in value of an Australian certified diamond in the year, the difference is staggering. Therefore, it comes as no surprises that Australian Pink Diamonds are opportune for investors.
* Past performance is not a reliable indicator as to future performance. The value of investments, and the income from them, can go down as well as up. Certain investments carry a higher degree of risk than others and are, therefore, unsuitable for some investors. The should not be considered investment advice and has no regard to the specific investment objectives, financial situation or particular needs of any specific recipient. It is published solely for informational purposes and is not to be construed as a solicitation or an offer to buy or sell any securities or related financial instruments.