Are Colour Diamonds Worth The Investment?

The pinnacle of the precious jewel industry for the last decade has been natural colour diamonds.   Natural colour diamonds are the most concentrated form of wealth on the planet, and in the last 10 years, they have had an average yearly value increase of between 15 and 30 percent.   This rise has been even more dramatic in the last two years where the increase in value has been over 30 percent for especially rare diamonds.

“Depending on colour and quality, the value of these stones could double every four or five years,” says Jeff Kushner, President of Ouroboro Diamonds.

As with clear diamonds, the “4C’s” of diamonds still apply to natural colour ones.   The “4C’s,” being colour, clarity, cut and carat weight, are all looked at in the grading of natural colour diamonds.    The colour grading scale from least desirable to most is as follows: Faint, Very Light, Fancy Light, Fancy, Fancy Intense, Fancy Deep and Fancy Vivid.

“No matter what kind of turmoil may be swirling around in the world, history has shown that colour diamonds should continue to be a smart investment,” opines Mr. Kushner.

Natural colour diamonds make up less than one percent of the world’s diamonds mined annually.   For every 10,000 carats that are mined every year, only 1-2 carats are colour diamonds. Their continued growth has shown no sign of slowing down, and even appeared to be exempt from the economic downturn of 2008.

Industry experts suggest that one of the reason for the continued value increase has to do with both the growing wealth in Asia, Eastern Europe and the Middle East as well as the large amount of companies across the world that focus on selling these rare stones.

One method to look at perceived value for natural colour diamonds is by looking at auction results and tenders.   The UK-based Moussaieff Jewellers recently purchased a rectangular cut, 8.77 carat, Fancy Intense Pink, VVS1 diamond for a record US$6.3 million, or US$721,200 per carat at the Christie’s New York “Magnificent Jewels” sale.

That record could soon be eclipsed, as insiders believe that the investment appeal of natural colour diamonds should continue to increase prices in the coming years.

In comparison, a record for the more common colourless or white diamond sold at auction was recently set at Sotheby’s Hong Kong.   It was an oval, 118.28 carat, D, Flawless, type IIa diamond that sold for US$30.7 million.   At US$258,708 per carat, the value was less than half of what was garnered for the natural colour diamond at the Christie’s sale.

Looking at white diamonds on a smaller scale, the RapNet Diamond Index (RAPI™) for 1 carat certified diamonds has dropped 5 percent in value over the last year.

The reason for the difference in value between natural colour and white diamonds is supply and demand.   More and more consumers are able to, and are looking, to buy natural colour diamonds.   As well, more and more dealers are looking to sell these stones.   However, the reality is that the quantity of new stones that are available each year is dwindling.

As an example of this diminishing supply, 90% of the world’s pink diamonds are from Rio Tinto’s Argyle Mine in Western Australia.   They ended their surface operations in 2012 with underground operations to be closed around 2018-2019.   Some analysts believe the mine will not have many years beyond that, with the rare stones becoming harder to find.

In Canada, diamond mines aren’t producing much in the way of colour diamonds, meaning there will be little chance of local materials coming in to increase the amount of supply.

“The coloured diamond bubble is not going to burst any time soon,” says Kushner.   “These stones may become more rare but the demand from potential customers will not subside.   When our company started it was really a niche industry, but now we are seeing new businesses focusing entirely on natural colour diamonds as well as existing ones adjusting their focus to these kinds of stones.”

The only question left is how will all the newcomers to the natural colour diamond industry affect it going forward. Will we see an even larger group of dealers purchasing these diamonds in order to sell to an even bigger group of waiting customers? No matter how big the market gets, it looks like natural colour diamonds will continue to be a lucrative and valuable commodity.

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One thought on “Are Colour Diamonds Worth The Investment?

  1. Pingback: How to Be Smart About Buying Diamonds | Shopping and Product Reviews

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