Buy diamonds as an investment?

Buy diamonds as an investment? © Own image

Useful or not?

Along with gold, diamonds are considered one of the most valuable things of all. Diamonds are the crystalline and clear special form of carbon, which was exposed to enormous pressure and high heat in the earth's crust. Diamonds are mined with painstaking human effort, from depths of up to five kilometers, where temperatures of around 50°C are used to mine the valuable form of carbon. The largest diamond mine in the world is so large in diameter that it can even be seen from space.

The mined rough diamonds are purchased from so-called "sights" of wholesalers and cutters. The main transshipment centers are Antwerp, Israel and Mumbai. The diamond market is a very discreet market with its own unchangeable trading rules and among the honest (- there are also many black sheep! -) dealers characterized by trust on handshake quality. Nevertheless, buying diamonds is always a risk for laymen if it is not done with a reputable dealer.

The mining of diamonds increasingly controversial from ethical and environmental points of view. On the one hand, the protagonists of the conventional system, who argue that only a naturally grown diamond is a real diamond and insist on a clear labeling obligation. On the other side - among others led by the Hollywood star Leonardo di Caprio from the movie "Blood Diamonds" - the industrially producible "Lab-grown Diamonds" (now also for jewelry use) are promoted for reasons of ecological sustainability, as well as the human aspect, since the diamonds are partly extracted from the rock by miners under inhumane conditions.

Trotzdem herrscht auf Diamanten aktuell ein großer Preisdruck. Neben der Produktion aus den Minen wird die Nachfrage aktuell auch durch Rückkäufe von Diamanten der letzten 100 Jahre, und nicht zuletzt auch durch die erfolgreiche Produktion von synthetischen Diamanten, gedeckt.

"4 Cs" of Diamonds: Carat, Clarity, Color & Cut


Unlike gold and other precious metals, whose price can be calculated simply from the pure weight and the current price of gold, the price of diamonds depends on the individual piece and its quality.

The 4Cs are the decisive factor:

  • Carat(weight),
  • Clarity
  • Color(color)
  • Cut(grinding)

This makes each diamond unique and - once certified - always recognizable.

Carat- size and weight of a diamond in carats

The weight of a diamond is given in carats (erroneously: kt or also ct), whereby the metric carat corresponds exactly to 0.2 grams. The carat weight is usually given to the 2nd decimal place, i.e. to the nearest two thousandths of a gram.

It also applies here that the price does not increase linearly with the size. Because larger stones are rarer, a one-carat diamond, for example, is not worth twice as much as a half-carat of the same quality, but many times more. Also, two small stones that add up to one carat, for example, are worth less together than a single one carat.

Clarity- The purity of a diamond

Natural diamonds are formed deep inside the earth, where pure carbon is exposed to enormous heat and pressure over billions of years, causing it to crystallize. In the course of this process, smaller inclusions and blemishes appear on the surface of the stones. Flawless diamonds without inclusions are correspondingly rarer and thus significantly more valuable than stones with blemishes.

For the determination of their clarity grade, diamonds are evaluated under a 10x magnifying glass, whereby not only the number and size of inclusions and blemishes, but also the type, location and color of the defects, are decisive. For the assessment of clarity, there are standardized tables for classification, such as the scale of the GIA:

Degree of purity English German Description
 FL Flawless Flawless No inclusions or blemishes visible at 10x magnification by an experienced examiner
 IF Internally Flawless No inclusions detectable at 10x magnification by an experienced examiner
 VVS1 Very, Very Slightly Included Very, very small inclusions Inclusions at 10x magnification can be recognized only with difficulty by experienced examiner
 VVS2
 VS1 Very Slightly Included Very small inclusions Inclusions small and relatively difficult to relatively easy to detect by experienced examiner at 10x magnification
 VS2
 SI1 Slightly Included Small inclusions Inclusions clearly visible at 10x magnification by experienced examiner, just visible to naked eye
 SI2
 SI3
 I1 / P1 Included / Piqué Inclusions visible to the naked eye Inclusions obvious at 10x magnifications and easily visible to the naked eye
 I2 / P2
 I3 / P3
 P2
 P3

Color-color & tints of a diamond


In addition to weight and clarity, another factor that plays a role in the value of a diamond is its color. In 98% of all cases, diamonds are discolored by nitrogen into yellowish. The stronger this tint turns out, the lower the price that can be achieved when selling.

The hue is checked in the laboratory in simulated daylight by comparison with a sample stone. For the classification of diamonds into color classes, the scale of the Gemological Institute of America (GIA) with a division into 23 color grades from D-Z has become established.

GIA  English   German
 D  Colorless   High fine white +
 E   High fine white
 F   Fine White+
 G  Near
Colorless
  Fine white
 H   White
 I   Lightly tinted white
 J
 K  Faint
Yellow
  Tinted white
 L
M   Tinted
 N  Very
Light
Yellow
 O
 P
 Q
 R
 S  Light
Yellow
 T
 U
 V
 W
 X
 Y
 Z

However, colored diamonds are a speciality. If the hue of a diamond is more intense than the GIA color grade Z or if a stone has a different color, it is considered a "fancydiamond" or colored diamond. The more intense the color, the rarer and therefore the more valuable.

As a sub-item of tinting, fluorescence should also be mentioned. Some diamonds have the property to glow bluish under UV light. Diamonds with high fluorescence, i.e. those that glow more strongly, are worth less than diamonds with low - or no - fluorescence. With colored diamonds, however, the reverse principle applies: the stronger the bluish glow, the more the "fancy diamond" is worth.

Cut - The cut of a diamond

Another quality characteristic that determines the price is the cut of a diamond. A cut must have successful proportions, be symmetrical and polished to a mirror-like finish. Only a perfect cut guarantees maximum reflection of the incident light.

This reflection then provides the famous sparkle of the gemstone. The best known is certainly the round brilliant cut, which promises a very good "light yield". However, there are also numerous other cuts, from the drop cut to the navette or marquise cut to the emerald or emerald cut.

Again, there are standardized tables, for example that of the Gemological Institute of America, which recognizes five gradations:

  • Excellent(Excellent)
  • VeryGood
  • Good(Good)
  • Fair(Fairly Good, Sufficient)
  • Poor(Bad)

The fifth C - Conflicts

Since illegally mined rough diamonds were used to finance civil wars in the past, attempts are being made today to prevent the trade in such blood diamonds and conflict diamonds. Therefore, rough diamonds without an indication of origin and Kimberly certificate are now largely outlawed by reputable dealers. For polished diamonds there is usually no certificate of origin.

The problematic history behind many stones has therefore led to an increase in the production of artificial diamonds in recent years. With such sustainable and ethically unproblematic stones, one wants to tap into new, younger buyer groups.

Synthetic diamonds

It has been possible to produce diamonds artificially since the mid-1950s, and ever-improving processes are making synthetic diamonds better and, above all, cheaper. In the meantime, an American start-up has also brought a process to series maturity, in which diamonds can be grown from real diamond chips under high pressure and enormous temperatures within a few weeks. These diamonds are then indistinguishable from real diamonds, even for experts, because they have the same geological signature as the sliver from which they were grown.

The fact that artificial diamonds are on the advance is proven not only by the fact that, in addition to "Blood Diamond" star Leonardo Di Caprio, numerous companies are investing in their production, but also by the fact that the world's largest diamond trader, De Beers, is now also entering the production of artificial gemstones. Probably this step is also based on the intention that the synthesis market does not slip into the uncontrollable illegality but finds its way into the diamond market in this way regulated. A synthetically produced diamond has the same properties as a naturally grown diamond, but costs only a third to a quarter of the price of a naturally grown diamond.

Diamonds as an investment

Diamonds as an investment are certainly only something for absolute connoisseurs and professionals. Because for laymen and even for practiced jewelers, real stones are often hardly distinguishable from the nowadays perfect syntheses or quality-improved, treated stones.

Therefore, in order to assess the value correctly, an expert's opinion or a certificate or grading report from an international gemmological institute is required.

Diamonds are in no way suitable as a short-term investment or speculative object. Trading is too difficult and the costs of buying and selling are too high. Unlike gold or silver, which are exempt from VAT or can at least be traded with differential taxation, diamonds are subject to VAT.

Gemstones and diamonds can make sense as a long-term investment if they are to be used as a defensive addition and in the sense of diversification to protect the investment portfolio against sharp declines. After all, a complete collapse in value is certainly not on the cards.

Those who want to invest in diamonds should know that investment diamonds are only suitable as a pure value investment from a size of 1 to 2 carats. In order to achieve the best possible resale value, the demands on the other Cs should also be kept high. Investment stones should be flawless and as colorless as possible, whereby stones that have been subsequently improved should be avoided.

Since the brilliant cut is the most common, the chances of finding a buyer for it are the best. Unlike gold, there is no international reference price for diamonds, and the individual valuation of each piece means that there is always a certain subjectivity in the appraisal by the inspectors, so trading in diamonds is difficult for normal investors and only something for professionals with the appropriate expertise.

Where to buy diamonds?

Diamonds are sold by jewelers, specialized gem dealers and also some precious metal dealers.

Sie möchten Diamanten verkaufen?

Solange der Diamantmarkt keine akzeptablen Ankaufspreise ermöglicht, die wir unseren Kunden gegenüber guten Gewissens vertreten können, haben wir uns bei Gold&Co. entschieden den Ankauf von Diamanten zeitweilig auszusetzen. Angesichts dieser Marktentwicklungen raten wir unseren Kunden derzeit von einem verlustreichen Verkauf ab.

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