Diamonds as investment

[adamtal]

Hi!

I have read forum post here related to diamond investment and the answer was always the same - it is not a good idea to invest in diamond. BUT:

From what I read the problem is that normal customers can not get diamonds at wholesale prices and they are buying retail prices. I am not sure I am correct, but rapaport prices are wholesale prices, right? Now, what if (I) someone can get xyz grade GIA certified diamond at rapaport price minus 15%. This is for white brilliant cut diamond, so it is really not that hard to login and check the actual price of that diamond. If we assume that white diamonds make just 8% increase pa, then if I (someone) buy a diamond for $1000 now. Rapaport price is currently for that diamond approx $1150. In 5 years with 8% increase the rapaport price will be approx $1700. I assume I will be able to sell it for how much? I suppose somewhere around $1200-$1300. I know that this is not the best "investment", but for securing the money from hyper inflation it does not look that bad. And 8% pa for white diamond is not that unrealistic.

Now how about the fancy color diamonds? The price is going higher much steeper, so can not really understand why everyone is talking about diamonds being a bad investment. For example fancy pink diamonds went up approx 350% in the last 10 years. And it seem to be that all fancy color diamonds are much better "investment" as white diamonds. Despite this fact everyone advises not to invest in diamonds here on this forum. Is it due to the fact that you are taking into consideration that you are unable to get diamonds at wholesale prices? Does rapaport minus 15% percent means wholesale price or is it still retail price? How are retail prices compared to wholesale to rapaport prices?

Thanks. Really interested in this diamond investment thought, but a bit confused, because of the negative approach from forum members here.

I know it is now about making a fortune, but it does not seem to be as bad investment especially not for securing the money.

 

[denverappraiser]

#1 Rapaport is not wholesale, at least in the usual usage of that word. It's a useful tool for seeing how diamond prices change over time and how things change when you alter a grade or two but It's a serious mistake to take their pricing to heart. Prices can range from 50% of Rap to double depending on details that aren't on the sheet. None of those are, by definition, either a bargain or a ripoff. It's simply a more complicated question than that.

#2 The problem for investors mostly isn't buying, it's selling. Buying is easy. Selling is hard. Yes, there's money to be made by trading in diamonds, and jewelers do it all the time, but there's a talent going on here that's decidedly different from just waiting for inflation. Some people are good at it, and they certainly are investing, but this is hardly what most people are thinking of when they describe an investor. Just because you can buy a particular stone at 15% back doesn't mean you can SELL it for that. We're talking about an attribute of you, not of diamonds, and nearly everyone crashes here.

#3 Diamonds do not go up and down evenly and across the board as a category. Yes, certain fancy colors have gone up steeply in the last decade, but others, like certain cuts, have gone down nearly as steeply. This trend will undoubtedly change. It always does. It's a fashion thing. What you're kids like is different from what your parents like and the grandkids will be different yet again. The skill here is predicting the future, and if you're good at THAT, you can definitely make your way as an investor but, frankly, I don't think diamonds is the best industry to leverage that particular talent.

 

[adamtal]

#1 Rapaport is not wholesale, at least in the usual usage of that word. It's a useful tool for seeing how diamond prices change over time and how things change when you alter a grade or two but It's a serious mistake to take their pricing to heart. Prices can range from 50% of Rap to double depending on details that aren't on the sheet. None of those are, by definition, either a bargain or a ripoff. It's simply a more complicated question than that.

#2 The problem for investors mostly isn't buying, it's selling. Buying is easy. Selling is hard. Yes, there's money to be made by trading in diamonds, and jewelers do it all the time, but there's a talent going on here that's decidedly different from just waiting for inflation. Some people are good at it, and they certainly are investing, but this is hardly what most people are thinking of when they describe an investor. Just because you can buy a particular stone at 15% back doesn't mean you can SELL it for that. We're talking about an attribute of you, not of diamonds, and nearly everyone crashes here.

#3 Diamonds do not go up and down evenly and across the board as a category. Yes, certain fancy colors have gone up steeply in the last decade, but others, like certain cuts, have gone down nearly as steeply. This trend will undoubtedly change. It always does. It's a fashion thing. What you're kids like is different from what your parents like and the grandkids will be different yet again. The skill here is predicting the future, and if you're good at THAT, you can definitely make your way as an investor but, frankly, I don't think diamonds is the best industry to leverage that particular talent.

Thanks for your reply. I was not sure, if rapaport is considered wholesale or retail, but I knew prices can be lower or higher depending on cut, but did not know how much percent (minus fifty or double of the rapaport price).

1 - I understand that it is not all about the rapaport pricing, because it is missing the cut grade. But, if we search for a particular stone in rapaport and the cut grade by GIA is excellent, polish excellent and symmetry excellent and still can get the diamond for 15% percent back, then would we consider it as a good price? Would we consider it as wholesale price? Does the price difference between rapaport and real selling price reflect anything else then the cut grade (cut grade, polish, symmetry) or only these factors are the one you talk about that can push the price for half of rapaport or double of rapaport?

2 - If I start with 15% back and we stick to the 8% pa increase of value of white diamond (from what I have seen from charts it is very conservative approach), then taking my first example. I buy for $1000 (now also taking into account that cut, polish, symmetry is excellent), rapaport price is $1150, in 5 years it will probably be $1700. Then what I do not know for how much should someone - trader, jewelry store etc. buy it from me for sure? For half of the actual rapaport price without question. But, 60-70-80% would be realistic?

3 - I tried to find fancy color diamond chart that went down in price, but I was not able to find any source. As I told, I have read the forum posts and seen that members here were talking about how some shapes were higher priced compared to the current ones, because that shape/cut is not trendy right now. But I was unable to find any fancy color diamond charts that would show any decline in price. Maybe you can send some sources, if it would be possible. The fancy color diamonds looks like a grail, because in long run it never went down - taking into account 10 year periods.

 

[sonnyjane]

[


2 - If I start with 15% back and we stick to the 8% pa increase of value of white diamond (from what I have seen from charts it is very conservative approach), then taking my first example. I buy for $1000 (now also taking into account that cut, polish, symmetry is excellent), rapaport price is $1150, in 5 years it will probably be $1700. Then what I do not know for how much should someone - trader, jewelry store etc. buy it from me for sure? For half of the actual rapaport price without question. But, 60-70-80% would be realistic?

If jewelry stores were so eager to buy diamonds second-hand you wouldn't find so many people desperately trying to sell their old wedding sets on eBay, pawn shops, etc. for half the price they paid.

You seem very determined to make this work. There's a reason it's never recommended here. Waiting years and years for a tiny return on a purchase that's not even easy to liquidate sounds like a crap investment to me.

 

[adamtal]

If jewelry stores were so eager to buy diamonds second-hand you wouldn't find so many people desperately trying to sell their old wedding sets on eBay, pawn shops, etc. for half the price they paid.

You seem very determined to make this work. There's a reason it's never recommended here. Waiting years and years for a tiny return on a purchase that's not even easy to liquidate sounds like a crap investment to me.

You are suggesting that if I walk to jewelry store with xy diamond for which we will find a price in actual rapaport with excellent cut/polish/symmetry then they are not willing to pay 50% of the rapaport price? Sorry, despite reading a lot - theory - I am very new to how it works in practice. I thought that someone would easily sell his diamond under this circumstances for 70-80% of the rapaport price.

edit: "for half the price they paid" - I always thought the problem is the jewelry is very bad investment, because you are not paying for the diamond, but for the whole "thing" and the retail price you are buying jewelry is much higher opposed to price which you would pay for the diamond alone. And THIS is the reason why they are unable to sell their diamond even for half of the cost they paid for it, because it was not worth it how much they paid for the whole ring.

 

[denverappraiser]

Do a search using the search utility at the top of the page. 1.00-1.05/G/SI1/GIA/xxx. That's about as mainstream a stone as you can get. Rap is going to be identical at $7100.

At the moment I see 9 stones ranging from $5472 to $7244.

Here's the cheapest at the moment:

http://www.b2cjewels.com/dd-6819629-1.00-carat-Round-diamond-G-color-SI1-Clarity.aspx?sku=6819629&utm_source=pricescope.com&utm_medium=referral&utm_campaign=pricescope.com

That's Rap-23%.

Is it a bargain? To be sure, that's an aggressive dealer and I'm not trying to pick on their goods. Someone is going to buy it and they will almost certainly be happy. The pricescope fans probably wouldn't love the cutting but not bad. It's a GIA-xxx after all. So your assumption is that you should be able to sell that for R-15%, right now, right? That's a $563 profit, right out of the gate. The faster you sell it, better the ROI. Right? 10% in a month is a GREAT return, right? I dare you to try it.

I humbly again suggest that the problem is on the SALES end. You're not going to get $6,035 (R-15) for that. You're not even going to get R-23. Most people are hard pressed to get R-40 unless they're really good at retailing things. You certainly won't get that selling to the 'we buy diamonds' sharks, pawn shops and similar professional buyers so who, exactly, are you going to sell to? Instead of gaining 8%, you're losing 25%. The 8% pa appreciation is a dangerous assumption by the way. On certain stones that's worked but it's far from true of the entire catalog.

 

[adamtal]

Do a search using the search utility at the top of the page. 1.00-1.05/G/SI1/GIA/xxx. That's about as mainstream a stone as you can get. Rap is going to be identical at $7100.

At the moment I see 9 stones ranging from $5472 to $7244.

Here's the cheapest at the moment:

http://www.b2cjewels.com/dd-6819629-1.00-carat-Round-diamond-G-color-SI1-Clarity.aspx?sku=6819629&utm_source=pricescope.com&utm_medium=referral&utm_campaign=pricescope.com

That's Rap-23%.

Is it a bargain? To be sure, that's an aggressive dealer and I'm not trying to pick on their goods. Someone is going to buy it and they will almost certainly be happy. The pricescope fans probably wouldn't love the cutting but not bad. It's a GIA-xxx after all. So your assumption is that you should be able to sell that for R-15%, right now, right? That's a $563 profit, right out of the gate. The faster you sell it, better the ROI. Right? 10% in a month is a GREAT return, right? I dare you to try it.

I humbly again suggest that the problem is on the SALES end. You're not going to get $6,035 (R-15) for that. You're not even going to get R-23. Most people are hard pressed to get R-40 unless they're really good at retailing things. You certainly won't get that selling to the 'we buy diamonds' sharks, pawn shops and similar professional buyers so who, exactly, are you going to sell to? Instead of gaining 8%, you're losing 25%. The 8% pa appreciation is a dangerous assumption by the way. On certain stones that's worked but it's far from true of the entire catalog.

Thanks for your time, i know it is not interesting to deal with total newbie in this sector/industry (or any other).

" So your assumption is that you should be able to sell that for R-15%, right now, right? That's a $563 profit, right out of the gate. The faster you sell it, better the ROI. Right? 10% in a month is a GREAT return, right? I dare you to try it."

No, I did not tell that I will be selling a diamond at R-15% and try to make money from it. I was talking about buying a diamond at R-15% with GIA/xxx and selling it after 3-5-10 years to protect my money when here in EU the economic situation goes bad. I was just talking about protecting the money for example from hyper inflation and wanted to know, if I will be able to sell in 5 years my diamond for R-30% at least. But you are telling me, hat I will have hard time selling it even for R-40% what really surprise me. In that case wondering for how much traders/dealers/jewelry stores are getting the stones, if it is not good deal from them to get diamond for R-40% from me.

This is why I told that wholesale vs retail prices are such a mystery for me. What can be considered as wholesale price and how do one know, if he is getting a diamond for wholesale price or not?! Can we assume that a wholesale price is on average somewhere at R-50% for excellent cut, polish, symmetry and no fluorescence diamond?

It is so hard to believe for me as newbie that you can not sell easily a diamond for R-30%-40% with excellent cut, polish and symmetry. And no one is grabbing it, because of great value/price.

 

[Dancing Fire]

That's Rap-23%.

Is it a bargain? To be sure, that's an aggressive dealer and I'm not trying to pick on their goods. Someone is going to buy it and they will almost certainly be happy. The pricescope fans probably wouldn't love the cutting but not bad. It's a GIA-xxx after all. So your assumption is that you should be able to sell that for R-15%, right now, right? That's a $563 profit, right out of the gate. The faster you sell it, better the ROI. Right? 10% in a month is a GREAT return, right? I dare you to try it.

Me too!...

 

[adamtal]

Me too!...

Off topic, but nice avatar. Lange makes the most beautiful watches

 

[Dancing Fire]

[quote="adamtal|1437866535|

It is so hard to believe for me as newbie that you can not sell easily a diamond for R-30%-40% with excellent cut, polish and symmetry. And no one is grabbing it, because of great value/price.[/quote]



In the past I have had able to buy a GIA top ideal H&A stone at Rap -23%, so if a consumer like me/you is able to buy at Rap -23% how can we expect to sell the stone back to the vendor for 30-40% back of Rap? My advise is to invest your $$$ in gold and silver bullion to hedge against inflation.

 

[Dancing Fire]

Me too!...

Off topic, but nice avatar. Lange makes the most beautiful watches

I'd agree ... you have a better chance of making money on a Lange watch than a diamond..

 

[ennui]

If jewelry stores were so eager to buy diamonds second-hand you wouldn't find so many people desperately trying to sell their old wedding sets on eBay, pawn shops, etc. for half the price they paid.

This cannot be said often enough. I suppose people don't know until they actually try to sell their old jewelry. There's a reason why so much gold is simply sold for scrap value. Buy jewelry, wear it, love it, enjoy it -- but don't ever expect to get your money back.

I think diamonds are a good investment if you are at the Elizabeth Taylor level of diamond buying -- enormous stones with amazing provenance. For the rest of us average folks, no.

 

[denverappraiser]

Asking the question is no problem. Really. I get it a lot and there is an increasing industry of people who are selling diamonds based on the 'investment' model. That's why I take the time to answer this sort of question. It's inaccurate, or at least deliberately misleading, and it's not in the consumer's best interest.

RE: Wholesale.
The typical way jewelers, web dealers, wholesalers and most other sorts of diamond dealers get their goods is through a mechanism called memorandum or memo. It's basically a consignment deal where a suppliers lets the jeweler know what inventory they have available and when a customer shows up looking for something in particular, the store shops around for wholesalers who have things that might fit the bill. They then consign in a few stones for a presentation. If the customer buys one, they take a cut and pay the supplier and whatever gets left unsold is returned. The jeweler has a gigantic inventory at their disposal and they have no money tied up in the process. I tend to avoid the word wholesale in this business because it's so abused but, to the extent that it makes any sense at all, this is what it's talking about. Each stone is priced individually. Some are near Rap, some are deeply discounted. The reasons for that discount can vary from cutting issues to cash flow issues at the supplier. There is no fixed wholesale price. Rap is not wholesale. Discount from Rap is not wholesale.

Why this is important is that this we're talking about your competitor in the sale. When you go into a jeweler and offer to sell a diamond, you are asking them to take it into inventory. There is no return, there is no financing offered, and the negotiation is usually pretty painful and time consuming. Repairs are common. New lab work is typically needed. In many places there are paperwork requirements and holding periods imposed by the police when you buy from the public. Your available selection is one and only one stone. The only advantage you have is price. You're a pain to work with, but you're cheaper than the memo guy. How much cheaper is what the negotiation is about. If they've got a client lined up and ready to go for that particular stone, they may be willing to pay more. If they're tight on cash flow or they're unclear on how long it's going to take for them to move it because it's not their typical cup of tea, they're going to bid less. Remember, on the above sample stone, the dealer is making a profit at R-23, and they're probably getting it on memo. There's no fixed number on how much the pain of dealing with the public is worth, just understand that it's more than zero. It makes no sense at all to pay more than they would need to pay on memo so the question at hand is how much less.

Bear in mind that most jewelery stores are rather small businesses. If they're going to shell out $10,000 for a stone, they need to flip it back to their suppliers to get their money back to work. They don't have that kind of cash sitting around and they usually don't have the time to wait for the right customer to show up. They want to make a profit so they're going to bid less than they think they can sell it to the supplier for. That's why the resale market is such a bite. Yes, you can directly sell to another consumer, and some folks are fairly good at this, but that new consumer is coming from the same position. The reason they're considering buying from you is the price. Period. All things being equal, they would rather buy from a store that has selection, settings, financing, return policies, and overall a better shopping experience. Don't you? If you're not prepared to discount, you're history. The only issue is a negotiation of how much. There's money here, but it's not easy. As mentioned above, some people are a lot better at it than others but now we're talking about an attribute of you, not an attribute of diamonds.

Lastly there's that 8% thing that you've mentioned several times. I'm not in the office at the moment so I don't have my pile of old Rap sheets handy right now but for most stones this is flat out incorrect. There was a jump in 2011 but, in fact, since 2012, most mainstream goods have actually gone down or stayed about the same. If the 3-5 years you're talking about were the LAST 3-5, you would not see this sort of appreciation. Next year may be different, past performance is no guarantee of future results, but in this case past performance isn't even all that great.

 

[ennui]

Thank you for taking the time to explain it all, denverappraiser.

 

[John P]

Neil Beaty has provided a thorough and accurate overview.

Another factor that's not accounted-for here is how diamond valuation systems will evolve. Color and clarity grading won't change; D-Flawless is rather specific. But cut-grading is rather new, and continues to evolve. Standards have tightened before and will tighten again. Whenever this happens a vast number of diamonds that qualified for a “top” cut grade in the original system drop to a lower grade in the new system.

After the price-crash of the early 1980s a European businessman predicted diamond prices would rise again and purchased a dozen GIA graded 2.00.-carat D-IF diamonds from an Antwerp broker. He put them in a safe-box. After 30 years prices had indeed come steadily up, so he pulled them out and returned to Antwerp for assessment. With GIA reports all would be well, right? ...Yes for weight-color-clarity. But GIA had added a cut-grade in 2006 and, with updated reports, every one of his "investment diamonds" was painted or dug at the girdle, resulting in VG-G in cut (-25-35% in value). Re-cutting them to even minimal EX standards would drop them well below the magic 2.00ct.

Although GIA now has a cut grade it's incredibly wide. As noted, cut influences value by a significant degree, and many details still cannot be judged with grading reports, even post-GIA-2006. AGSL started grading cut in 1996 but revised their system three times. In fact, since 1980 the world’s major laboratories have rolled-out, revised and re-introduced different cut-systems more than a dozen times. With no uniform approach between the labs, and the considerable width present in GIA's "top" grade (possibly leading to more future revisions) these details become key to long-term considerations. Not simply for your purposes, but also resonating with professionals and how they choose to stand-behind what they sell (or not) with long-term guarantees.

There is also an interesting buzz as it relates to Man-Made-Diamonds. Who knows, if it gains traction, how that could impact future values in the natural diamond market. There's a Lab Grown Diamonds forum here on Pricescope where that could be discussed.

 

[denverappraiser]

That's a great point John. Diamonds are, at the end of the day, a fashion product. Investors tend to ignore that point to their own peril. A GIA 'certified' D/IF 2 carater is sort of the prototypical definition of an investment grade diamond. It's hard to imagine that the bar could move but, as John points out, it has. People who buy that sort of thing would never stand for a 'very good' cut these days unless it's at a steep discount even though, 20 years ago, the cutting was just fine. They were cut for weight because that's what people wanted. It's not that they're any less lovely now than they used to be but the marketplace has changed under them. On the other hand, people who bought big fancy blues in 1995 are sitting pretty. Saying that, on average, things are up doesn't help that 2 carat investor one bit. Will it change again? Surely it will. That's how it works. Marquise cuts were hot in the 70's and sold for a premium. Then they were dogs that were hard to sell at any price, now they seem to be coming back again. Predicting what will be popular in 2020 is a tough job. NONE of this would be visible by looking at a Rap sheet.

 

[oldminer]

DIamonds have some potential as an investment, but are certainly not among the top 25 things that one might more safely invest in hoping for a reasonable return and a relatively easy conversion into cash. The return is far from guaranteed and turning diamonds into cash at the then current value is blind, elusive and generally difficult even for experienced dealers. A lay person is not likely to meet with a good end result. The possibility does exist, but I'd say it is a remote possibility.

Diamonds have proven themselves an extremely compact and efficient storehouse of value during catastrophic time, such as the Russian revolution in the early 1900's or the second world war period of the mid-1900's. Those people who escaped the catastrophes all around them during those times using diamonds, gold and other precious commodities were forced to take drastic steps to make their escapes and to start new lives. Even if they got a fraction of the market value for their precious stones, they were able to succeed because they had those items to trade for their lives. I'd call that an extremely good investment for that particular purpose, but certainly those stones and gold were not converted at a fair face value. Still, those jewels were their tickets to safety.

Looking at the current EU economic crisis, it does not appear to be headed in a direction of catastrophe or anarchy. It all looks like a rather expected event unfolding which will take some years to settle out in ways we may not yet understand, but I don't think it looks like chaos in governance, but more like people losing some buying power and adjustments in how much services and handouts each government can actually make to members of the public. Printing money and thinking everything will work out has an end game which is pretty predictable. We will likely see this played out in the USA at some future time, too. Hopefully, it will be an orderly change rather than a tumultuous one. A few nice diamonds might be beneficial to have on hand, but not necessarily as "investments" Consider them more like a life saving ring on a boat to throw to someone who has gone overboard.

To buy diamonds as long term "lifesavers" one still must accept the difficulties and risks mentioned in this and other replies. One must be willing to dig deeper into the mystery of actual diamond wholesale pricing which is not Rapaport pricing. There is a lot more to understand before it is a suggested strategy.

You had a good question and I think it has been well answered. Buy diamonds to wear, shop and learn BEFORE buying. Pay a fair amount to a legitimate seller and enjoy them. Buying them any other way will make whatever investment you might have in them less effective in the long run. Knowledge and patience are key ingredients.

 

[adamtal]

Thank you, I really appreciate every post here, because I am learning from every single one. As I have been reading threads here those members came to answer who I saw have great understanding of diamond business. Very glad you found some time and shared your knowledge.

As I probably told in my first post - I was trying to get familiar with what diamonds are, how they are graded, what are certificates, what they are for, how rapaport works and looking at diamond price charts. I think the most misleading was to see how diamonds appreciate in value over time, because I could not imagine how hard it would be to sell them again.

It was easy to find a lot of info about price charts for different kind of diamonds - white, fancy color etc. - but I was unable to find any info on the resale value, liquidity speed, wholesale vs retail prices for diamonds.

I thought that even if it will not make money in long run/short run, it will protect money from hyper inflation, economic uncertainty and it will be fairly easy to sell them for R-30% any time, because that would be pretty great deal. But I see the biggest problem is the cut grade does not really reflect how shiny, good the diamond looks in real life.

Interesting that you told me to check how many diamonds "normal" people are trying to sell for example on ebay. I went there and checked. Most diamonds sellers are selling a lot of diamonds (jewelry stores, traders etc) at pretty competitive prices, but did not find many private sellers.

I also thought that pricing a diamond is more transparent and easier, then it really is. I though the price difference between rapaport and real sealling price is determined only by cut grade, polish grade, symmetry grade and fluorescence grade. That these attributes adds or takes 20-30% to rapaport price and thats it. For sure, I am only talking here about round cut diamonds where it is the easiest to determine the price. But from what I read here it is much more complicated, then taking into consideration the attributes I mentioned.

ps. Also would be interested to know what do you guys think about the charts I have seen a lot and probably you also. That the demand for diamonds will be bigger, then supplies in few years, so it is expected that the prices will go higher. Also argyle pink will become more and more rare, so they will appreciate in same tempo as they were in the past. Or there is a "fear" that due to naturally grown diamonds the prices will not go higher, because the supply will be controlled this way?!

 

[denverappraiser]

You have many complicated questions here. I'll tackle a couple.

In my local market, Denver, which is a relatively small place as jewelry goes, Craigslist has 2300 jewelry ads at the moment. Nearly all of these are private parties and a fair fraction are for diamonds.

http://denver.craigslist.org/search/jwa

Ebay is a mixed sort of deal and people fear returns and the implied guarantee that happens there. It's easy to get burned as a seller and it makes people nervous. Dealers know how to be careful and are a bit better prepared to weather the risks but private sellers don't care for the risk. That said, the category of engagement and wedding rings has nearly a million listings. Maybe 10% are private parties. That's a lot of sellers.

http://www.ebay.com/sch/i.html?_odkw=diamond&_osacat=491&_from=R40&_trksid=p2045573.m570.l2632.R3.TR11.TRC2.A0.H1.Xdiamond.TRS1&_nkw=diamond&_sacat=91427

A telling thing from an ebay search is in completed auctions by the way. Almost none of the ads actually culminate in a sale.

http://www.ebay.com/sch/Engagement-Wedding-/91427/i.html?_from=R40&_nkw=diamond&_in_kw=1&_ex_kw=&_sacat=91427&LH_Complete=1&_udlo=&_udhi=&_samilow=&_samihi=&_sadis=15&_stpos=80216&_sargn=-1%26saslc%3D1&_salic=1&_sop=13&_dmd=1&_ipg=50

In terms of future demand, the story always comes down to China and India. Will the demand go off the charts or will it fizzle? That mostly seems to depend on whether the person you're talking to is buying or selling. Personally I think the prospects are good but it's far from a done deal. Currently, most Chinese brides don't do the diamond thing. If they start to in a big way, and they might, it's going to bury the industry with demand and raising prices won't really help. The mines can't ramp up supply. That's just not the way mining works. They're still only going to get whatever God put there. It's happened before. The demand in Japan went from near zero in the 70s to the 2nd largest world market 30 years later. Any such analysis ends with the observation that China and India include a LOT of brides. The market potential is greater than the rest of the world combined.

All of those Chinese grooms are still going to want to get married and if they can't get diamonds, they'll get something else. They're not interested in diamonds anyway, they're interested in the bride. Sapphire. Jade. Gold. Houses. Maybe nothing at all. There are plenty of options and there's nothing about diamonds that makes them especially better than any of those other things for this purpose. It's just tradition, and it's a made up foreign tradition at that. We'll see what happens. We live in exciting times.

 

[adamtal]

As I said many times I appreciate your and other members help in this foru. I try to objectively look at things. Is the situation really as bad as you and most members suggest on the forum?!

I have tried another search on ebay with more realistic parameters:
- search for completed listing
- do not search for jewelry, because it is pretty different to loose stones, so search instead for loose diamonds category with GIA certificate
- 500 dollars plus
- no reserve
- starting bidding from 0 dollars and not higher

Result:
- every diamond sold (no surprise, because no reserve and no minimal value)
- every diamond sold for more, than 50 percent of similar diamond listed on pricescope (average value calculated, when more diamonds were similar to ebay one) - was searching for every diamond for cut grade, clarity, carat, color, symmetry, polish, flourescence.
- on average 60 percent price of pricescope diamonds

I know this still does not look as the best investment and not trying to convince myself why it is good idea to buy diamond, just looking for pure facts. I know for you the cut dimensions are very important and the shine of diamond, but I was not looking at exact dimensions and HCA value.

This was done comparing current ebay prices with current pricescope prices. If we go back in time 10 years, stick to 3% pa appreciation (you suggested 8% pa is too much and you are absolutely right, because white diamonds go up 135% approx every 10years) and bought a diamond 10 years ago for 1000usd on pricescope. It would be 1300usd now and can be sold for approx 700usd. Not a good investment, when taking into account inflation, but I am almost sure that the return would be higer with fancy stone.

One problem can be the cut grade as you suggested. As you told 10 years back the cut grade did not exist and everyone was looking mainly to carat weigt. If someone bougt a bad cut diamond he would probably have problem selling it for 60% of current diamond prices.

Hope my math is good.

 

[OoohShiny]

This is a great thread, thank you to everyone contributing

 

[denverappraiser]

Don’t call me a hoarder but, as it happens, I have every copy of Rap for the last 30 years or so. It’s part of my work research library.

Let’s look at a few number:
1.00– 1.49/round/G/VS2. This is about as mainstream as a stone can get.

Current (July 2015) $8,400.
August 2011, $8,700
August 2005. $7,200
August 2000. $6,600.

You can work out the PA change but it’s sure nowhere near 8%, and that’s assuming you can sell at the same discount where you buy, an assumption that we agree is unlikely.

By the way, don’t forget the VAT. You’ll have to pay it up front, and you won’t get it back at the end.

By all means take a run at it. It'll be a fun ride and if you're good at selling, there's even money to be made. Jewelers do it all the time although even THEY generally hate long term holding. They want to flip things as fast and as frequently as possible.

You're right, fancy colors are completely different. You're the one who brought up Rapaport as a valuation approach, and they don't discuss fancy colors at all.

 

[acaw2015]

Great thread and thank you all for sharing!

I simply wanted to add a small personal example from real life. I recently upgraded my solitaire and wasn't sure if I should keep my original diamond or sell it. It is a nice round, nothing special, but I think so "normal" that it should be easy to sell. My jeweler told me he could buy it in exchange for a new diamond, offering me the same price for my old diamond as what I had payed five years ago for it, which is well below buying "the same" stone today, but in my eyes still a very good deal. He didn't want to buy it without me buying the new diamond there.

I also went to a second-hand shop in my town and asked for a price for simply selling the stone itself/no exchange. I simply wanted to know the price range I could expect so they didn't look at the stone, they only calculated their price from a piece of paper (the rapaport?). I didn't want them to pick the setting apart. So they told me they could sell my stone for half the price of buying it new. And I would get half of that. So, 25%. Not a great deal imho.

Now, I wont say every store has the same policy, but in my (limited) experience, it is exactly as the gentlemen here have explained and considering what they have written I actually have a better understanding of the offers I was given for my stone. Diamonds are fashion items. Not for investment. Maybe a life ring though??

In the end I decided to keep my old diamond, and it has now found a new loving home within my family.

 

[adamtal]

I know I have come up with rapaport, but at that time was not sure, if it is wholesale or retail price and how much it can change. But, if we stick to rapaport pricing and you go back for that exact diamond you were looking previously (1.0-1.49/round/G/VS2) it should be 130%-135% appreciation every 10 years. Then it will be 3% pa. Much lower then I first thought.

You are always telling me to try the diamond business I do not know even the basic, just trying to learn something. For sure you can make money,if you are good at selling, but it does not only apply to diamonds

Anyway lot of good info here and learned a lot.

 

[denverappraiser]

Actually I"m seeing 127% in 15 years so the average (in that category and on that grade) is under 2% pa, but the real issues are off the Rap sheet entirely. Buying for an investment in 2000 at R-15 and selling at R-30 in 2015 would superficially show a profit of $270 or 4.8% total over the 15 year holding period. That's more like 0.3%pa, but the assumption of that R-30 sell makes all the difference. The same deal buying in 2011 and selling in 2015, the most recent 4 year hold, would net you a loss of 20%. Worse if you can't land that R-30 sell.

The thing is that it doesn't really matter whether Rap is wholesale or retail. It's something of a way to compare between grades and over time, which is why I"m a loyal subscriber, but the prices do not stand on their own as either one of these.

 

[John P]

I just logged into the most-used B2B diamond trading platform and searched 1.00-1.09 carat G VS2 GIA 3EX non-fluorescent round brilliants available in the USA. 104 diamonds are listed. The cheapest is Rap-31%. The most expensive is Rap+26%. That's a price-difference of nearly 100% bottom-to-top, for diamonds with the same GIA grading, all at wholesale.

 

[Texas Leaguer]

Adamtal,
I think a good range of cautionary advice has already been well articulated here. So I feel comfortable saying some positive things about diamonds as “investment”. First, the challenge is not so much in the vehicle of exchange, but the fact that there is not a ready ‘exchange’ available to a consumer. Assuming you bought the right diamond at the right price and that the market for said diamond has increased over time, you still have to be able to exit the market at a price level commensurate to that you entered on, in order to enjoy any appreciation.

So where do you go? Hit all the jewelry stores with diamonds in hand? No certainty that they will be buyers rather than opportunists. Ebay? There are risks and costs, and the uncertainty that anyone will pay the price you want, even if it is a good price.

Having said that, I have seen skillful consumers buy, hold and resell diamonds and make money. They have studied the market well enough to understand both the potential and the risks, and they have developed relationships with reliable companies they can buy and sell through.

Just like any other kind of investment, if you understand the nature of the market and you have sufficient tolerance for the risk, it can make some sense. But unlike the stock market, you can’t simply get lucky and buy shares today, see the price change in your favor and push the sell button and make a profitable trade.

Diamonds have been more subject to volatility in recent years than in the decades preceding. People are understanding the risks in diamond prices better today than in the past, and that is part of the reason you are getting so much good cautionary advice here!

As a flight currency there is probably no better vehicle than diamond. They are small, light weight stores of concentrated value and they do not set off metal detectors. But as was already pointed out, if the goal is to protect against catastrophic events, it matters not if you make a profit. Only that they can be sold for something.

You may be one of those people who takes such an interest that you end up doing enough homework and groundwork to invest in diamonds successfully. And after reading this thread, I am not concerned that you will go into it lightly.

 

[adamtal]

John, is it allowed to share which trading platform you looked at or not allowed on this forum? Then it is probably the same as on pricescope, some are +xy% and other -xy%, but it comes down probably only to dimensions of diamond and angles etc, if taking into account that everything else is same. You guys here are always concerned about how diamonds shines and probably the sellers too, so they adjust the prices accordingly

Denverappraiser, from what I have seen on charts the price is going up every 10 years approx 130%, but I have seen only charts and do not have access to rapaport. But the charts were based on rapaport prices and if remebmer correctly for one carat D-F color and, FL-VV1 diamonds, on the other hand I do not question that you can see for that particular diamond 127%, very close to the charts I see 130-135% in 10 years. From what I have seen on ebay I totally agree that selling R-30 on that platform is very hard - there were few examples of it, but most have sold Pricescope average- 40%-50%. I suppose, if the trend continues (probably will, I think it will, because it is quite steady for the pat 40 years), then until 2020 there will be a price jump, so the diamond will again steadily increase that 130%. Probably the next 5 years will the price appreciate faster as in the last 5 years.

Another debate is the pink diamonds. It seem to be that pink diamonds are making more intense price growth every year.
Price per carat:

Vivid pink:
1979 - 50.000
1989 - 150.000
1999 - 270.000
2009 - 420.000
2014 - 600.000

2009-2014 years approx 140%
1999-2009 years approx 150%
1989-1999 years approx 180%
1979-1989 years approx 300%

For intense pink almost as good appreciation, but not as good, and fancy light pink again not as good as intense pink, but still good. Not saying it is much better compared to white diamonds, but still better for p.a. return. However here the selling problem can be even worse.

 

[adamtal]

Adamtal,
I think a good range of cautionary advice has already been well articulated here. So I feel comfortable saying some positive things about diamonds as “investment”. First, the challenge is not so much in the vehicle of exchange, but the fact that there is not a ready ‘exchange’ available to a consumer. Assuming you bought the right diamond at the right price and that the market for said diamond has increased over time, you still have to be able to exit the market at a price level commensurate to that you entered on, in order to enjoy any appreciation. ..............

..............You may be one of those people who takes such an interest that you end up doing enough homework and groundwork to invest in diamonds successfully. And after reading this thread, I am not concerned that you will go into it lightly.

Thanks Texas Leaguer for your imput too.

"Diamonds have been more subject to volatility in recent years than in the decades preceding."

This is why I think, if the trend continues we can see higher appreciation in value as we seen in the last years. But you are right, no one will put his hand into the fire that the price will as steadily grow as it was growing in the past decades. Interestingly it can be seen on pink diamond example in previous post. The p.a. appreciation is slowing down and who knows, if it will slow down even more or in the next few years it will start to accelerate even more.

 

[denverappraiser]

I"ll let others tackle the fancy pink question. There are far too many variables there to get into it. We're having a tough time here with just one (Rap).

I put my magazines away but I have a few handy that are reasonably close to 5 year steps on Rap.

1.00/F/VVS1/round

July 2000 $8,400 per carat.
July 2005, 10,200
may 2011, 13,500
July 2015, 12,000

That's 117% in the last 10 year window. A scosh under 2%pa,