Although gold remains a favorite among investors, an increasing number of investment-seekers are choosing diamonds over the leading precious metal.
Not surprisingly, diamonds have a great deal more in common with precious metals, such as gold; than they do with any of the other asset categories. For example, beyond the obvious similarities in mine production, diamonds can also be re-used or recycled for new fabrication, thereby providing an additional source of supply and another active marketplace. This is in stark contrast to energy, agricultural and livestock commodities which are spent, consumed, or transformed, but are rarely recoverable.
Commodity production also constitutes a differentiating factor when considering an investment in precious gemstones, like diamonds. Most commodities tend to be highly concentrated in particular regions of the world. For example, 47% of oil is produced in the Middle East and Eurasia, copper primarily comes from Africa (80%) and Russia (11%), the United States is the largest source of corn production (39%), and silver is mined primarily in Latin America. As for diamonds, they have been discovered throughout the world, from Southern Africa to Russia, and from Brazil to Australia.
The beauty of diversification is it’s about as close as you can get to a free lunch in investing. – Barry Ritholtz
Politics can play a significant role in the performance of investments. For example, the value of investments can fall if company officials and CEOs are influential members of the political elite and are subject to privileged conversations, or if they can bribe politicians to gain access to confidential information that provides insight not available to the international investment community. Perhaps the greatest example of this is stock prices, which react to news about what governments around the world have done, or might do.
One of the more challenging things in life is not being the guy who does the cheating, but not saying anything about it and going along with it. – Dale Murphy
All things considered, the global diversification of diamond production contributes to the commodity’s lower volatility (in relation to other commodities,) and makes the investment less susceptible to geopolitical and other specific risks, such as variations in weather due to climate patterns; which can devastate agricultural and livestock commodities. This puts diamond in an asset class of its own, and clearly demonstrates why investing in diamonds is a great way to avoid some of the most common risks of investing in traditional investments.
If you are diversified among different forms of wealth, nations and industries, you’ll be safe in the long-run. – Sir John Templeton
Over time, and due to its conservative and constant increase in value, diamond investments (like investing in gold) is regarded by investors to be a stable and dependable investment vehicle. Diamond’s propensity to perform well in times of uncertainty has been demonstrated particularly in times of economic crisis.