Do Diamonds Increase in Value??

[BKG6053]

I have cash and am looking to do one of three things: 1) Deposit in my bank @ 4.00% interest, 2) Buy Gold, or 3) Buy a Diamond. The diamond I have in mind is H-color/SI2/Marquise/2.70 carat/very fine cut. The question being do/will Diamonds fetch a 5% (?) increase in wholesale/retail price year-over-year or could this stone not budge an inch in price over the years? Of course, I want the Diamond, and am looking for financial justification to "go ahead" and make the purchase.

 

[Lorelei]

Date: 12/31/2009 6:50:44 AM
Author:BKG6053
I have cash and am looking to do one of three things: 1) Deposit in my bank @ 4.00% interest, 2) Buy Gold, or 3) Buy a Diamond. The diamond I have in mind is H-color/SI2/Marquise/2.70 carat/very fine cut. The question being do/will Diamonds fetch a 5% (?) increase in wholesale/retail price year-over-year or could this stone not budge an inch in price over the years? Of course, I want the Diamond, and am looking for financial justification to 'go ahead' and make the purchase.

Diamonds are not a good investment unfortunately BK, and fancy cuts such as marquise can be even less desirable, I would invest your cash in another way if you hope to increase it. When reselling a diamond it is usual to only recoup 30 - 50% of what you originally paid for it ( this is assuming a round diamond with a GIA or AGS report of fine cut), a marquise would be less desirable still and especially if it has no grading report or one from a lesser lab than the above.

If you want the diamond buy it with the investment in your happiness as being the driving factor, not making money on it because this is highly unlikely. If you are ok with knowing once you buy it, like a new car, a good portion of the value has gone then thats fine but don't expect to profit from it if you tried to sell it.

This article by David Atlas will be helpful for you;

http://journal.pricescope.com/Articles/49/1/Gemstones%2c-Diamonds-and-Jewelry-as-Investments--Are-you-kidding-or-are-you-really-serious.aspx

 

[Londongirl1]

If you have cash and are looking to invest it, then a diamond is not the thing to buy (unless we're talking about a very rare diamond that's worth gazillions of pounds). If you want a nice diamond and have the money to splash on it without thinking "I want to get my money back in years to come" then go ahead and get that bling.

Incidentally, I'm fortunate enough to be looking to invest some money too but I certainly won't be buying a diamond with it

 

[ct-appr]

My recommendation is to hire a financial adviser and get a long range investment plan in place. There are many investment opportunities out there depending on your time horizon and risk tolerance.

 

[dssxxxx]

Date: 12/31/2009 6:50:44 AM
Author:BKG6053
I have cash and am looking to do one of three things: 1) Deposit in my bank @ 4.00% interest, 2) Buy Gold, or 3) Buy a Diamond. The diamond I have in mind is H-color/SI2/Marquise/2.70 carat/very fine cut. The question being do/will Diamonds fetch a 5% (?) increase in wholesale/retail price year-over-year or could this stone not budge an inch in price over the years? Of course, I want the Diamond, and am looking for financial justification to ''go ahead'' and make the purchase.

I want to know the name of your bank???

Where is this bank that pays 4.0%. I have a bundle that I will transfer this AM.

 

[Bosie]

Please advise us where you can get 4% at a bank nowadays.

 

[denverappraiser]

The tricky part of investing in diamonds, or any other form of personal property for that matter, is in the selling, not the buying. To answer your question, yes, most diamonds have gone up in ‘wholesale’ value over the last several years but most have gone down at ‘retail’. This discrepancy doesn’t have to do with the stones, it’s about the nature of marketing and the way retailing has changed in the last few years. Margins for jewelers have plummeted and a store that years ago would have expected a 40% gross margin is now going toe to toe with dealers who will do it for 10%.

Even the above doesn’t really answer your question because, as an individual seller, you have no opportunity to sell at ‘wholesale’. Dealers prefer to buy merchandise through their regular channels for a variety of sound reasons and consumers prefer to buy from dealers for equally sound reasons. The result is that you will need to sell at a discount, often a fairly steep discount, in order to get the sale. This discount is going to offset a decade or more of your gains from the slow appreciation of the stones. Given that situation, it makes little sense to call it an investment, at least in the financial sense.

Diamonds are extraordinarily cool little things and by all means buy them if you love them. Buy them if it will make your sweetheart feel loved, it will make you feel successful to have them, to mark your turf or any of an assortment of other good reasons but don’t go into the deal expecting to ever see your money again.

Neil Beaty
GG(GIA) ICGA(AGS) NAJA
Professional Appraisals in Denver

 

[kenny]

Diamonds do go up in value.

Buy one for the fair retail price of $10,000.
Sell it to a retailer for the fair wholesale price of $5,000.
The retailer then sells it for the fair retail price of $10,000.

There, it just went up 100% - for the retailer.

 

[FB.]

Diamonds have too many layers of people taking a cut, that if you wanted to sell instantly, you'd lose 30% or more. It could take several years before you could sell the diamond for what you paid and by that time, most other investments may have increased in value even further.
With gold, you'd lose about 5% if you buy bullion coins such as Eagles, Maples, Sovereigns or Krugerrands.
With the GLD or SLV ETF'S, you'd only lose a couple of % dealing spread, but the ETF's are trusting someone else to "look after" your gold, which kind of defeats the "safe haven" role that gold plays.

Investments are distorted by inflation. What you consider to be a "profit" (which gets taxed) is usually just the adjustment upwards of the cost of everything in your daily life.
A true investment increases in value faster than the everyday cost of living. For the record, I believe that government-supplied inflation figures grossly underestimate true inflation to serve a political agenda.


Suppose that you have enough money to buy a new car. You put it in the bank and earn your 3% interest. But in the meantime, inflation rages and amounts to 10% per year.
After ten years, the cost of a new car has risen (in line with inflaiton) to 2.6x it's original cost. The value of your savings has risen to 1.3x what you had to start with.
Your savings will now only buy half a car, even though you have more money than you did before. But inflation has stealthily robbed you of your true buying power. You might argue about cars not increasing in value, but perhaps consider your savings in terms of how many trolleys of shopping they would buy and the result would be much the same as my illustration.

I'm a very serious private investor and I've had a large gold holding for several years (bought at $350-$400/oz), which I intend to keep for several more years, before I anticipate that it will reach it's final peak.
I suspect that diamonds will have a reasonable correllation with gold, but the dealing costs make them less viable.
Since the spring, I've been on a diamond buying spree, not because I anticipate that they will make a good investment, but because they are nice to own and enjoy (and I made lots of money buying bombed-out shares last autumn and winter that I decided to "cash-in" to something more tangible) and I suspect that all of the recent TARP, Govt bailouts and QE will mean that very substantial (maybe frightening) inflation is on the way, which will make most things dramatically more expensive to buy in the future. Think back to the late 1970's; I'm expecting something worse to arrive within the next few years.

But that is merely my interpretation and I am not a qualified investment advisor, which is who you should really speak to for advice on your investments.

 

[oldminer]

At the base, wholesale level diamonds have tended to go up over extended periods of time. There was one very rapid burst of "up" in the late 70's into 1980 and then came a downward bust especially hard for the finest qualities. Since then the trend has been upward. However, there are difficulties in the market for diamonds and while it is still a relatively safe item of value, there are reasons that dealers spend a lot of energy keeping in a state of liquidity and trying to borrow less. Banks are more reticent to lend to diamond dealers although some borrowed money is still very common among dealers who have maintined their credit worthiness. The value of diamonds is based on marketing, faith, belief, confidence, demand, supply, consumer aspirations and many other things all of which are subject to important changes over time and as economies change globally and regionally. This is all at the wholesale level which cannot be attained by consumers.

At any level of retail, even at very near wholesale, diamonds won't fulfill many aspects of an investment. Selling them at the right time to a willing and able buyer at even a very low retail price is not something easily accomplished when you have one or only a few diamonds. It takes a vast selection and major investment to be able to sell one at a time to the right parties for the going price. Consumers just don't have such a luxury and must sell into the market for the going wholesale amount second hand diamonds bring in the market. There is nearly no other viable option although various other methods exist, in theory, more than in reality.

When a diamond is to be sold, the buyers who compete for them must be contacted. We always suggest getting a written offer and shopping it a bit before making a decision to sell. If you are pressured by a buyer, if they refuse to give a written offer good for several days, if they insist you leave it with them for a period of time, if they make you give them the price you want in spite of the fact that you are not in any position to know the true market value, if they do not want to pay you on the spot, immediately, then walk away!! A real buyer is much like an independent appraiser. Buyers need some element of consumer advocacy in their method of operation. The buyer has all the facts and the consumer must be assumed to have partial knowledge at the very best, possibly none. An attitude of mutual help is what is required to make selling a diamond feel good enough to consider. No, diamonds rarely prove a true investment, but there are many many luxury items of equal or greater cost that wear out, expire, decay or go out of style while diamonds are close to being forever with decent liquidity and value coming back after a lifetime or more of daily wear. It isn't all that bad when one considers how much a Bentley or Rolls costs and what it is worth after 150,000 miles, let alone what it cost to own over that long a time.

Just like FB, I fear the coming period of rapid inflation due to our country's debt and spending levels. Inflation may raise prices, but it will also impoverish many people. Rapid inflation is a secret tax on everyone which we cannot evade or avoid. It may look good to get a nice return on your CD's and savings accounts, and people living on investment income initially may feel good about it, but I promise that rapid inflation, should it become a reality, will not make many of us happy at all. I'm no investment counselor, but it seems so apparent to me that no alternative exists. It is a matter of "when" not "if", sad to say. Carpe diem. We may be seeing some of the best times ever before we all go into the sea of overspending and debt defaults. Of course, I hope I am totally wrong. I'd love to be an optimist on this subject, but I can't realistically see the other side of this issue.

 

[Rockdiamond]

Everyone is making excellent points here.
For many years when a consumer would mention they were buying for investment, I would discourage them, if financial investment was the goal. As has been pointed out, consumers loose when they try to sell diamonds.

About a year ago I realized that I may have been incorrect.
Not that diamonds make a "good financial investment" for the consumer- but that the quality of so many other financial investments was so poor, that diamonds actually seem not as bad as they seemed prior to late 2008.
How many stock portfolios were reduced to ashes.
If they''d have bought diamonds well- or even paid full retail- they''d still have something in their hands.

To the OP- if you were going to keep financial return in mind ( after all you''re read here) make sure you get a well cut stone with a GIA report.
Marquises are only good if you really love them.
Many other shapes are more desirable in the market.

 

[wildcatmccane]

Cue financial adviser:

Don''t do diamonds and don''t do gold.

Gold is the thing to buy right now right? Wrong. Gold was the thing to buy before gold was the thing to buy. Now it will either go up some more or come down. Do you think it will go up some more to the point where it mitigates the guaranteed 4% in a safe bank (as you stated)? nope.

Diamonds are also bad to invest in. I am going to get run out on a rail here...diamonds aren''t uncommon on earth. There are tons and tons of them found each year! controlling holding companies of DeBeers makes them appear rare items. Not true.

 

[HopeDream]

An investment such a a bond, GIC or T-bill will often let you know ahead of time the amount of interest you will make and a set maturity date. Some bonds even include a compensation payment that will adjust for changes in inflation over the life of the bond.

Speculation (when one buys an item/collectable/antique/peice of art/diamond/gold with the expectation that the value of the item will rise) is very risky because the item that you purchase is only worth what a buyer will pay for it.

If the value of the item rises at the same rate as inflation then you''re not realy making any money.
(Buy it this year for $5000, sell it next year for $5500, but.... next year everything (computers, watches, handbags etc.) that used to be $5000, now sells for $5500 because of rising inflation --> even though you think you''ve made $500, you don''t actualy gain additional purchasing power because everything is more expensive).

Diamonds are a luxury consumable good like a sports car, and just like a sports car, it loses half its value the minute you drive it off of the lot.

If I were you, I''d go with the 4% savings account (diamonds don''t accrue compound interest)

and yes, do go see a personal financial planner!

 

[justginger]

Just to anwer you, dssxxxx and Bosie, I''m getting 4.7% in my high interest account at the moment.

http://www.bankwest.com.au/Personal/Savings_and_Investment/TeleNet_Saver/index.aspx

 

[FB.]

Gold prices tend to outperform all other investment classes during periods of high inflation, or economic troubles.
While gold, diamonds, art, antiques and so on may fluctuate in value, the risk with cash or bonds is many-fold:

1. Will inflation destroy the value of your money as per my illustration above? (share prices made 0% returns from 1966 - 1982 , while inflation raged, cash lost a lot of it's "buying power", bonds became worthless during the later stages and gold rocketed - just maybe it's about to happen again)

2. Will taxes take a large bite of your "profits"? (it's hard to track diamonds and gold for capital gains tax purposes and some countries do not tax these items)

3. Will the bank holding your cash collapse and therefore you have a 100% loss?

4. If you buy a fixed-rate bond paying a low interest rate, it will be not be saleable for what you paid if interest rates increase because newer bonds will be offering higher interest rates. (do you expect interest rates to stay super-low forever?)

5. Will the bond default, with a 100% loss to you? (do you trust companies financial strength now and in the uncertain future?)

Rockdiamond touched upon this when he spoke of share portfolios reduced to ashes, and those people would at least have *something* left if they had bought solid, tangible assets that they coulod keep in their posession.

These are troubled times and I fear that we are merely "in the eye of the storm", with a larger and more damaging "second wave" of problems that will dwarf the pain felt during the first wave. I suspect this economic turbulence will persist until the middle or even late part of this new decade.

 

[BobR]

Just like FB, I fear the coming period of rapid inflation due to our country''s debt and spending levels. Inflation may raise prices, but it will also impoverish many people. Rapid inflation is a secret tax on everyone which we cannot evade or avoid. It may look good to get a nice return on your CD''s and savings accounts, and people living on investment income initially may feel good about it, but I promise that rapid inflation, should it become a reality, will not make many of us happy at all. I''m no investment counselor, but it seems so apparent to me that no alternative exists. It is a matter of "when" not "if", sad to say. Carpe diem. We may be seeing some of the best times ever before we all go into the sea of overspending and debt defaults. Of course, I hope I am totally wrong. I''d love to be an optimist on this subject, but I can''t realistically see the other side of this issue.
David S. Atlas

GG(GIA), ASG, Sr. Mbr. NAJA

www.datlas.com

Unfortunately I agree with David''s comments and FB''s. I think it''s in various governments'' perceived interests to let inflation rise to reduce the real value of national debts, however the past has shown that inflation is not something that is easily controlled.
Also I see QE as having effects on currency stability with its knockon affect on international trade (in this global economy)

Maybe Nostradamus and armegeddon 2012 are not far fetched!
Happy New Year!!

 

[wildcatmccane]

Keep in mind that gold, while can shield from the damage of inflation, has historically done nothing. Defiantly a lot aren''t going to buy that, but if we forget what people who are selling us packages tell us, it is quite clear.
In a medium risk aversion strategy you see little gold. In high risk strategies you see little gold. In high risk aversion strategies you more. But in the same strategy you invest in common CD''s....

Gold stabilizes damage from true investment vehicles, yet a CD can do the same thing consistently (with compounding interest) without the worry that gold will drop in value. Don''t be taken by all the ads on Fox stations about gold blah blah blah

Roth IRA if you haven''t started is the best if you are scared of the future. Ultimate stability if from a credit union offering come cd rates. Fear sells products too, and people make a lot of money from it. Don''t buy it.

And no one refuted my comment about there being tons of diamonds in the world. Its just not a sound investment plan.

 

[FB.]

Date: 1/1/2010 12:12:10 PM
Author: wildcatmccane
Keep in mind that gold, while can shield from the damage of inflation, has historically done nothing.

While I don't wish to turn this thread into too heavy an investment-biased topic, I'd like to point out that gold is not as bad as you think.

1966: DOW Jones share index: 1000pts.
2009: DOW Jones share index: 10000pts.

An increase of 10x.

1966: GOLD: $35 per ounce.
2009: GOLD: $1000 per ounce.

An increase of 30x.

Add-in dividends from the shares and their compounding effect and - since it's Christmas - let's call it a draw, over the 40+ year period of "modern times".

 

[kenny]

Date: 1/1/2010 3:07:47 PM
Author: FB.
1966: DOW Jones share index: 1000pts.
2009: DOW Jones share index: 10000pts.
An increase of 10x.

1966: GOLD: $35 per ounce.
2009: GOLD: $1000 per ounce.
An increase of 30x.

Pick different dates and you''ll get very different numbers.

Nobody knows the future of any investment.

 

[neatfreak]

Not a good idea. Period. Throw it in your bank and call it a day if those three things are your options. You''ll never get your $ back much less a return on an SI2 marquise.

 

[denverappraiser]

Date: 1/1/2010 3:44:03 PM
Author: kenny

Date: 1/1/2010 3:07:47 PM

Author: FB.

1966: DOW Jones share index: 1000pts.
2009: DOW Jones share index: 10000pts.
An increase of 10x.

1966: GOLD: $35 per ounce.
2009: GOLD: $1000 per ounce.
An increase of 30x.

Pick different dates and you'll get very different numbers.

For example:

1/1/2000 Dow Jones industrial 10878
1/1/2010 Dow Jones industrial 10428

1/1/2000 gold 288.50
1/1/2010 gold 1096.00

Neil Beaty
GG(GIA) ICGA(AGS) NAJA
Professional Appraisals in Denver

 

[FB.]

Date: 1/1/2010 3:44:03 PM
Author: kenny

Date: 1/1/2010 3:07:47 PM
Author: FB.
1966: DOW Jones share index: 1000pts.
2009: DOW Jones share index: 10000pts.
An increase of 10x.

1966: GOLD: $35 per ounce.
2009: GOLD: $1000 per ounce.
An increase of 30x.

Pick different dates and you'll get very different numbers.

Nobody knows the future of any investment.

Would you like to choose a set of dates? Be my guest. I chose those because they were about as far back as the time when gold was released from being backing for the $US.

Regardless of timespan (measured from present to almost any point in the past; is 43 years not an investment lifetime?), you'll still find that gold has done remarkably well, relative to all other investments.
Even more interesting, look at the DOW:GOLD ratio. It's currently about 10x. The great depression lows were about 2x. The late 1970's saw the ratio again at about 2x. The DOW has trended from 40x in Y2K, to about 10x now (a 4-fold shift). If the depths of past recessions are anything to go by, we'll see DOW:GOLD approach 2x in coming years; a relative outperformance of five-fold.

I'll be even bolder if you like; I'll estimate 2013-2014 as the time that DOW:GOLD ratio hits 2. Mark it in your diary and throw it back in my face, if I'm wrong.

With all this inflationary pressure, the ratio seems more likely to be as a result of gold rising, than the DOW falling by 80%.

Sure, nobody can be certain of an investment's performance, but would you describe Warren Buffet as a lucky gambler, or a shrewd businessman who knows what to buy, when to buy it and - most importantly - when to sell it?
Did you know that he was buying lorry loads of silver in the late 1990's?
Would you describe someone who owns their own business (and therefore owns 100% of the outstanding shares) as a gambler, or a hero of capitalism? Owning your own business is a choice of how to allocate capital.
I'm a serious trader and investor - that's why you see me on PS at strange times of the day, when other people might be at work. I parasitise other people's good businesses by buying their shares when they're cheap - and offloading them when the profits look good.

 

[FB.]

Date: 1/1/2010 4:50:39 PM
Author: denverappraiser

Date: 1/1/2010 3:44:03 PM
Author: kenny

Date: 1/1/2010 3:07:47 PM

Author: FB.

1966: DOW Jones share index: 1000pts.

2009: DOW Jones share index: 10000pts.

An increase of 10x.


1966: GOLD: $35 per ounce.

2009: GOLD: $1000 per ounce.

An increase of 30x.

Pick different dates and you''ll get very different numbers.


Nobody knows the future of any investment.

For example:

1/1/2000 Dow Jones industrial 10878
1/1/2010 Dow Jones industrial 10428

1/1/2000 gold 288.50
1/1/2010 gold 1096.00

Neil Beaty
GG(GIA) ICGA(AGS) NAJA
Professional Appraisals in Denver

Which only demonstrates that the foundations of capitalism are crumbling (as represented by the flagship DOW Jones).
Last ten years.... gold up 4x, shares showing a small loss. Gold still wins. Diamonds would also look very good in that timeframe, compared to the DOW.

Those people who bought the DOW at 1000pts in 1966 had to wait through 16 years of high inflation before they made any profit, by which time, was worth a lot less than they thought.

 

[denverappraiser]

Not to sound bullish for gold. The previous decade looks like this:

1/1/1990 DJIA 2810
1/1/2000 DJIA 10787

1/1/1990 gold 396
1/1/2000 gold 288.50

Neil Beaty
GG(GIA) ICGA(AGS) NAJA
Professional Appraisals in Denver

 

[FB.]

Date: 1/1/2010 4:58:21 PM
Author: denverappraiser
Not to sound biased for gold. The previous decade looks like this:

1/1/1990 DJIA 2810
1/1/2000 DJIA 10787

1/1/1990 gold 396
1/1/2000 gold 288.50

Neil Beaty
GG(GIA) ICGA(AGS) NAJA
Professional Appraisals in Denver

Which shows that all forms of investment go through cycles.

An investment starts out cheap, so the smart money sees an opportunity. The prices rises a little over a period of a few years and the speculators start to notice a trend. The speculators push the price higher at a faster rate, which then reinforces the trend. Then Joe sixpack sees a certain investment at the top of the league tables and wants a piece of the action. Prices then sky-rocket as a mania develops by people who don;t understand WHY an investment is doing well and prices therefore no longer refect the true value (think hi-tech in 1998-2000, houses in 2004-2006).

The bubble prices become unsustainable, the smart money decides to bank the profits of their earlier shrewd investments and prices then rapidly collapse. Often the price will then gradually unwind much of it's gains, tending to settle at an inflaiton-adjusted higher plateau than the previous low price.

In my interpretation, we are just over halfway through a cycle. Shares are still coming down or stabilising down from their Y2K bubble. Gold is still moving higher in it's own uptrend. When the general population starts talking about gold over dinner tables, that'll probably be the time to sell and move back to shares.

Certain large publications ran articles titled "the death of equities" in the late 1970's, after 15 years of zero returns - ironically, sentiment had collapsed just as the DOW was about to blast above 1000 and head towards 12000 over the following 20 years to 1999/2000.
In Y2K, the situation was similar for gold; a downtrend since 1980 had crushed morale. Just as major central banks decided to sell their gold to buy $US (a sign of despair), the gold price changed towards an upwards trend that continues to this day and likely has several years to run. Other commodities tend to have a high correltaion with gold. I lump diamonds in with commodities.

 

[denverappraiser]

Agreed. The problem with diamonds as an investment is that they’re NOT commodities, at least not in a since that makes them available for investment purposes. It’s like investing in lumber (which is a commodity) by buying plywood at the Home Depot and hoping for a resale opportunity later. It’s conceivable that this will work out but it’s not really very likely unless you're well connected. If you want to invest in the future of diamonds, buy stock in the diamond mining companies, the dealers or the ancillary industries, not the product.

Neil Beaty
GG(GIA) ICGA(AGS) NAJA
Professional Appraisals in Denver

 

[wildcatmccane]

On diamonds, I know they don't change, but it seems like the rating systems do.

GIA started doing cut recently right? well your older diamond may have an ideal cut, but if your paper work is before the cut was introduced, why would I the consumer buy the outdated graded diamond when there are millions with one that has the new grading.

Like i said, doesn't change the features of the diamond, but I the consumer don't want to play any games.

Diamonds just are not rare enough to have real value. Like a soda machine. pay 75 cents and get a soda and pretend you are special because you got a 75 soda when no one else has a soda in their hand, forgetting the machine is stocked full with 75 cent sodas that cost 2 cents to make and is completely infinite. DeBeers is the soda machine.

I love finance talk love planning and saving. i even like that soda idea i just thought up