Are Diamonds a Good Investment?

Wear, Profit, Repeat

Now that the economy is back on the upswing, investors are looking for new ways to protect and increase their hard-earned money. Many financial experts recommend diamonds.

Values fluctuate based on supply and demand (and rough diamond prices are pretty low this year), but pricing scales have lacked uniformity. Individual appraisals are still the only surefire way to know the value of a particular diamond; the uniqueness that increases their value among fashionistas does the opposite for economists. However, experts are devising objective ways to determine their value, which in turn increases their viability as reliable capital. One diamond investment pioneer, GemShares, partnered with NASDAQ OMX Group to develop the Diamond Basket Index, a standard for certifying and pricing investment-grade diamonds.

According to BMO Capital Markets analyst Edward Sterck, “diamond prices are likely to increase as consumers compete for an increasingly scarce commodity.” Sterck cites the dwindling number of new discoveries in countries with existing mining operations; which will eventually cause a scarcity that could explode the value of existing diamonds.

In 2011, China replaced Japan as the world’s second-largest diamond buyer, and major jewelers capitalize on this by targeting young Chinese couples. It’s working so far; sales of diamond engagement rings in Shanghai have nearly doubled since the 1990s, thanks in part to these campaigns.

Diamond Demand: Brangelina, Marilyn, and Beyoncé

Any good investment must take consumer trends into consideration; over the past century, diamonds have gradually evolved from sources of pre-marital financial security to modern-day bridal musts.

In the 1950s, Marilyn Monroe called diamonds “a girl’s best friend” during an iconic song in “Gentlemen Prefer Blondes”. Hollywood still shines a spotlight on diamonds in the form of carat comparisons, paparazzi close-ups, and jeweler-sponsored proposals. No investor could ask for a more valuable visibility boost than a starring role in the engagements of Hollywood’s most bankable power couples.

When Kanye West asked Kim Kardashian to marry him, he capped off his elaborate proposal with a 15-carat cushion-cut ring. Brad Pitt spent a year collaborating with jeweler Robert Procop, customizing every detail of the 16-carat emerald-cut band that now turns heads on Angelina Jolie’s finger. And though Beyoncé’s hit “Single Ladies” implored men everywhere to “put a ring on it”, not many could afford the one she wears, which features a flawless 18-carat diamond that Jay-Z had created especially for her.

Sentimental Capital: The Diamond Tradition

Britain’s royal family has a more emotional connection to the gem. When Prince William and Kate Middleton announced their engagement, the future Duchess of Cambridge posed in a dress the same deep blue as the sapphire that’s surrounded by fourteen diamonds in her ring. Princess Diana famously wore it in the 1980s, turning it into a pop culture icon with priceless sentimental value. William called it “very special” and explained, “As Kate’s very special to me now, it was right to put the two together.”

As couples continue to emulate their parents and celebrity role models, symbolizing their special bonds with these special gemstones, it’s a better time than ever to invest in them.