In our last blog, A Brief History of Diamonds, we reviewed that diamonds are composed of extremely concentrated pure carbon formed by immense pressure combining with heat over a long period of time. Because they take so long to form under these extremely strict conditions, diamonds are a rare and naturally diminishing commodity.
Carat, clarity, color, and cut (4 C’s) are analyzed to decide the price of a diamond. No single characteristic outweighs another. Each factor contributes to the diamond’s final value. Essentially, the cost per carat is based on a stone’s rarity. The rarer the stone, the more expensive it will be. Fancy Colored Diamonds are in short supply. There is absolutely no doubt about that. The world’s diamond deposits are slowly becoming depleted and would take millions (or billions) of years to naturally duplicate. To put mining limitations into perspective, it takes more than 250 tons of mined ore in order to produce a one-carat, gem-quality stone. With the Argyle Mine’s closure in November 2020, we’ve lost the source of 90-95% of the world’s pink diamond supply. There simply aren’t enough mines that produce high-quality colored diamonds and none that come close to the brilliant colors produced by Argyle. The closure of the mine marks the end of an era and the impacts of the closure will be felt for many years to come.
The driving factor behind the continuous rise in price for investment-grade fancy colored diamonds is a steady increase in demand with a limited (now virtually non-existent) supply. In addition to natural sources depleting, most of the rare colored investment diamonds being offered now are preowned stones, not freshly mined. Colored diamonds are a long-term investment. They are not meant to be liquidated soon after purchase. Appreciation for most diamonds is notable after a decade - or more. Investors are also beginning to educate themselves on underexplored commodities and are steadily realizing that colored diamonds are an excellent investment with the power to hedge against financial turmoil. Because of this, it is likely that investors will decide to keep stockpiles of Fancy Colored Diamonds for themselves, allowing their stones to appreciate in value. This will ultimately result in even less supply while swelling demand.
With supply having come to a halt and demand for these precious stones increasing exponentially in the last decade, intense escalation of value should be no surprise. It is an opportune moment to begin considering investing in Fancy Colored Diamonds. Understanding the factors that contribute to why diamonds are so rare and valuable is critical for a diamond investor, especially when determining which diamonds have the potential of achieving the highest ROI.
Source: FCRF April 10th, 2021
Please email FCD Invest at info@fcdinvest.diamonds to discuss your personalized long-term investment strategy. For more information on Fancy Colored Diamonds as an investment, please visit our Fancy Colored Diamond informational page linked here.
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