As the turbulence in global financial markets continues more and more investment professionals are taking notice of the diversification benefits of investment diamonds. The safe-haven characteristics of investment diamonds together with their low price volatility and physical tangibility make them an interesting prospect for investors looking to diversify their investment portfolios especially during times of uncertainty.
The major risk to investors looking for an exposure to investment diamonds is misinformation. Although there has been an exponential growth in interest in the investment diamonds, there are only a few investment houses with a real expertise in the investment diamond market. The diamond market is very much a market unto itself and hence a prudent exposure to this market requires a thorough understanding of the investment diamond market.
As evidenced by current diamond price trends, there is a clear distinction between short-term volatility and longer-term fundamentals of the global diamond investment market. In the short-term, investment diamond prices are more effected by intra-dealer market sentiment whereas in the long-term the ‘book-end’ nature of the diamond pipeline whereby there is a high concentration of power by major diamond miners at one end and major diamond jewelry retailers at the other end, is a determining factor in price trends.
Investment diamond prices have fallen seven percent since August amidst soft trading activity. As news of macro-economic uncertainty filtered through to diamond dealer markets, speculative trading activity abruptly ceased in what was already an over-heated market. We expect investment diamond prices to remain flat over the next month with a marginal increase in early December.
Notwithstanding the softness in diamond prices in the very immediate term, the underlying fundamentals of the investment diamond market remains very robust. Investment diamond prices are still up 22 percent since the beginning of the year. These strong price increases are set to continue into the medium-to-long-term as demand continues to outstrip supply, demand from emerging markets such as China continues to surge and increased expenditure on diamond marketing and branding persists.