Investing in Coloured Diamonds

Coloured Diamonds. A rare blue diamond—The Farnese Blue—sold at a Sotheby's auction for $6.7 million. Image courtesy of Sotheby's.

Diamonds have been revered for their beauty for millennia. Nowadays, coloured diamonds offer a strong return on investment—even in the current global market.

Debatably less complex than the cryptocurrency market and, decidedly, more beautiful than stocks, fancy coloured diamonds (FCDs) are increasingly turning the heads of wealthy investors. Thanks to a surge in demand for FCDs over the last decade—and their reputation for being a safe long-term investment—it’s no wonder connoisseurs are adding them to their financial portfolios. What makes these tangible assets so appealing? They have the ability to appreciate in value whilst simply being admired.

Determining the value of coloured diamonds

The value of diamonds is measured by the four ‘c’ elements—carat, clarity, cut and colour. While in colourless diamonds, all the ‘c’s carry equal weight, the colour of an FCD accounts for over 50 percent of its overall value, according to the Diamond Investment & Intelligence Center (DIIC). The Gemological Institute of America (GIA) uses terms such as Fancy Light, Fancy, Fancy Dark, Fancy Intense, Fancy Deep and Fancy Vivid to grade a coloured diamond’s hue intensity. Fancy Vivid is the most desirable grading, however; the value of an FCD increases as much as 25 percent with each saturation level.

Due to predictions that in the next decade there will be no more pink diamonds to mine from the Argyle Mine—the biggest producer of rare pink diamonds in the world—this hue is extremely sought-after in the current market. There are also no new rare diamond mines in sight, experts stipulate. This may mean that in the next 10 years, the FCD market will only consist of diamonds that are already ‘at hand’.

Size and shape are both traits that can influence an FCD’s colour—and therefore determine its value. Larger diamonds allow light to travel further into them, often leading to more intense hues. According to the GIA, the style of the cut is also crucial. Mixed cuts like the radiant can intensify certain diamond colours.

Why invest in coloured diamonds?

It is estimated that out of every 10,000 diamonds that are mined, only one carat can be labelled ‘Fancy’, making FCDs an extremely alluring investment—the effort of finding high quality examples is labour-intensive and time-consuming. According to the DIIC, the price of FCDs hasn’t substantially dropped in almost 40 years.

This is in part due to their never-ending demand; major diamond companies and collectors are always on the lookout for the next steal. Much like fine art, FCDs are tangible and multifunctional assets that investors can physically see, possess and enjoy. As they are made of the strongest material on earth, they’re hard to substantially damage and almost impossible to destroy—making their durability a further appeal. FCDs do not adversely affect other investment assets, have lower volatility, are not subject to the same market forces as other investments and give dramatically higher returns.

‘Experts predict that unless new mines are discovered, diamond production is projected to diminish over the next 30 years, making diamonds a rarer commodity than ever’—Diamond Investment & Intelligence Center

How to invest

Different individuals will have contrasting opinions on the best approach to FCD investment depending on their budget and the reason behind the investment itself. A method familiar to many connoisseurs is investing in shares of diamond mining companies—the main ones being DeBeers, Dominion Diamonds and Rio Tinto. While this method is beneficial as the companies are obliged to maximise ROI for their investors, it may take them additional time in paying out their shareholders.

Single stone investment, on the other hand, focuses on one single diamond. It is thought to be the safest choice, especially for beginners on the scene. A significant drawback, however, is this method of investment requires a substantial sum of money to begin with. Investors with more funds available may also opt for multiple stone investment—like estate jewellery—and gather a collection of stones.

Lastly, rare diamond investment funds are a viable method of investment into FCDs. These work by giving cautious investors the chance to have their fund managed by professionals with a special interest in FCDs. Whatever investment method is chosen, carrying out substantial research and provenance checks is necessary, as is talking through plans with a diamond investment strategist.

Coloured diamonds: stellar results at auction

Rare FCDs in red, green, blue and pink colours have historically always done well, both at auction and on the general market. In May 2017, a Sotheby’s auction in Geneva, Switzerland, saw a pair of diamond earrings—which are almost 16 carats each—sell for $57.4 million.

In addition to being different colours—one is Fancy Vivid Blue and the other is Fancy Intense Pink—the diamonds also differed in price. The blue diamond, renamed The Memory of Autumn Leaves and the rarest of the two, sold for $42.1 million alone. The pink Dream of Autumn Leaves sold for around $15.3 million.

In April 2017, a Sotheby’s auction of fine jewels in Hong Kong sold the Pink Star—a 59.60-carat oval mixed-cut diamond—for around $71.2 U.S. million.

The Cartier Sky Blue Diamond ring—an extremely elegant square emerald-cut Fancy Vivid Blue diamond weighing 8.01 carats—sold for over $17 million (around $2.1 million per single carat) at Sotheby’s Geneva in November 2017.

This feature first appeared in Arts & Collections Volume 3, 2018. Click here to view the digital version of the magazine. 

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