COMMENTARY – Rare coloured diamonds can be attractive investments in uncertain times

0
228

By Mark Wilding, Western Cape Diamonds

Are coloured diamonds an attractive alternative asset and a store of wealth?  Allow me to take you through some points.

ROBUST DEMAND: With more widespread education about fancy coloured diamonds and increases in the numbers of high-net-worth individuals (HNWI), demand for rare coloured diamonds continues to increase. 

With the closure of Rio Tinto’s Argyle mine in late 2020, which has contributed much of the world’s pink diamonds supply, demand for rare natural coloured diamonds, notably reds and pinks, is expected to continue to increase.Pink natural diamond

LIMITED SUPPLY: With an expected dip in global natural rough diamond supply by 2021, stable production is expected to follow through 2030.  Demand is outstripping supply for these niche stones where rarity equals value and growth, which is echoed by the recent world record price at auction for a fancy vivid purple-pink diamond, “The Spirit of the Rose,” which sold at Sotheby’s for USD$26.6 million or over USD1.7 million per carat in November 2020. 

HNWI: There have never been so many millionaires and, according to the Credit Suisse Global Wealth Report published in 2019, “The number of global millionaires will exceed 62 million by 2024, a rise of almost 16 million from today. The number of ultra-high-net-worth individuals (UHNWI) with wealth above USD 50 million, is expected to reach 234,000 by 2024, a rise of 66,000.” 

PRICE STABILITY: Price stability is the reality! In the first quarter of 2020, when the prices for all categories of colourless diamonds dipped due to market volatility, the prices for fancy-coloured diamonds demonstrated much greater stability. 

Concerns regarding the oversupply of a new mine discovery from the primary market, should be put at ease by the fact it takes on average 5-6 years to extract diamonds from the initial geological discovery of an economically viable diamond deposit, including the removing of overburden, putting infrastructure in place for the extraction and final stage recovery of rough diamonds.

Just like rare watches and art, this tangible asset is also seen as an alternative store of wealth and diversification by some family offices and their wealth advisors. Rare natural coloured diamonds can be transported easily. As a store of value they can help to preserve a family’s wealth for the next generations. 

SYNTHETIC DIAMONDS: What about lab-grown diamonds, I hear you say.  Are lab-grown diamonds a threat to the industry?  In my view…NO!  

Ever since their early development in the mid-20th century, they have not had an impact on demand for rare natural diamonds. Synthetic diamonds do not have the natural scarcity of a natural diamond. This is evident with the recent upscale in production from Chinese factories where prices have already decreased and are set to decrease, in my view, significantly in the long term.

At Western Cape Diamonds, we offer a consultation and brokerage service for UHNWI, HNWI, wealth managers and family offices with regard to the purchase of rare fancy coloured diamonds. Contact us to learn more. 

[email protected]

Disclaimer: The opinions expressed in this article are solely those of the author.Mark Wilding, Western Cape Diamonds

Mark Wilding, Western Cape Diamonds