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INVESTING IN FANCY COLORED DIAMONDS

By Thomas Gelb 

 

Color Diamond Investment Key Facts
  • Over the past 14 years, natural blue and pink diamonds have more than quintupled in value.
  • The Argyle mine in Australia, which produces over 90% of the world’s pink diamonds, is set to shut down in 2018. Unless another major source is discovered, pinks are poised to rise dramatically in price.
  • The average price of all colored diamonds sold at auction from 2002-2011 has increased in price more than triple the prices of 3ct “white” diamonds and platinum.
  • In reviewing extensive price data on color diamond sales over the past 14 years, only 20 diamonds achieved prices of more than $1 million per carat, all during 2008-2012, a period of great global economic upheaval.

 

Fancy colored diamonds have long been prized for their beauty and their scarcity. It was their rarity that led them to be valued so highly by royalty. Since the 1600s fancy colored diamonds have been the exclusive realm of the sophisticated diamond connoisseur. A number of the world’s most important and historic diamonds have been fancy colored, from the liquid blue of the Hope Diamond, through the lush hues of the Dresden Green, to the stark beauty of the pink Agra. Because of their exquisite colors and due to the fact so few exist, fancy colored diamonds have always kept their value.

 

In 1995 the Gemological Institute of America updated their fancy colored diamond grading system. For the first time the entire range of colors could be described and compared based on an independent evaluation. From this point the value of these diamonds has increased dramatically.

 

The only truly accurate available pricing information for these diamonds is through auction house records. In an effort to analyze the potential return on investment for fancy colored diamonds we have collected data on more than 1,300 sales at auction over the past 14 years. Invariably the prices have increased in every color grade range, and in some cases this rise has been dramatic. For example, Fancy Vivid Blue diamonds have increased in value more than 500% on average from about $300,000 per carat to more than $1.5 million per carat.

 

 

The price of fancy pink diamonds has risen dramatically as well, from less than $50,000 per carat to more than $300,000 per carat, over the past 14 years. Today pink diamonds are viewed as solid investments given the projection that their supply is limited. The Argyle mine in Australia, which produces over 90% of the world’s pinks, is set to run out of mineable material and cease production in 2018. At that point the number of available pink diamonds will diminish significantly, and their prices should rise accordingly.

 

 

Fancy colored diamonds stack up very favorably against investments in financial instruments or colorless diamonds. As you can see from the chart below, the average price of all colored diamonds sold at auction have increased in price more than triple the prices of 3ct “white” diamonds and platinum over the same period.

 

 

At the end of the same 10 years, the average price of all colored diamonds sold at auction is more than five times the returns on the Dow Jones Industrial Average.

 

 

Over the 14 years of data used for our analysis, only 20 diamonds have achieved prices of greater than $1,000,000 per carat. All of these occurred between 2008 and 2012, a period of great global economic upheaval, drawing the reasonable conclusion that color diamonds are viewed as a safe haven in any economic climate.

 

Visit the rest of our education section to learn even more about rare diamond colors.

 

About the Author

Thomas Gelb has spent almost 20 years learning about diamonds. He worked at the GIA for most of his career learning almost exclusively about colored diamonds and ultimately running that department. He is currently the Educational Director of the Natural Color Diamond Association, and the Principal of Gelb Gemological Consulting. In addition to his Graduate Gemology degree (GIA) he holds a BA in Economics from the University of Massachusetts, and an MBA from Columbia Business School.