Diamonds the New Gold?

There is a commercial running now advertising investing in diamonds instead of gold, touting “diamonds the new gold.” Many people have lost interest investing in gold, since the price has dropped to around $1,600 per ounce from a high of a $1,895 in September of 2011. Unlike gold, for the average consumer there isn’t a readily available market for pricing and selling diamonds. The pricing is set by a few large companies like De Beers. Jewelry grade are those that are finished and polished or rough stones, however they don’t have the attributes of other desirable investments, since they lack liquidity and fungibility. Fungibility is important, using gold for an example, gold of the same carat weight is gold, but with diamonds there will be great diversity of size, color, clarity and cut- no two diamonds are identical.  If you invested in diamonds and wanted to sell them quickly, you have to find a willing buyer, which is hard to do. Jewelers won’t buy them from you unless than can mark them up and make a profit, and the company that bought them from you may guarantee that they will buy them back, but will not guarantee the price. Investors should stay away from direct investments in diamonds, but if they have an interest may want to investigate companies that mine or supply them.

2 thoughts on “Diamonds the New Gold?

  1. . . . and the insurance on diamonds is a cost of holding that kind of investment that I personally don’t like very much!

    1. Kent says:

      Good point, that is why I got rid of my 3 carat diamond pinky ring 🙂

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