Since 1970 natural fancy blue diamonds have gone up approximately 100% every 6-7 years, natural fancy pink diamonds have doubled in price every 7-8 years, and natural fancy yellow diamonds have doubled in price every 9-11 years (see Figure W.1). During recessions, colored diamonds tend to retain their value on a relative basis and in stable or healthy economies they appreciate in price.
In general, the value of colored diamonds (whether destined for a private collection or commercial investment) is inevitably driven by the economies of the world. The economic cycles of the past thirty-five years have seen colored diamonds reach new heights in value as price records were broken. Then values leveled off as world finances tightened, and then the cycle began again and even newer heights were reached. In fact, steady growth with periods of acquiescence continues to be the standard for colored diamond valuation, all because of scarcity.
There are four main reasons why investors purchase colored diamonds:
- Portability - Colored diamonds are considered the most concentrated form of wealth in the world. To see such rarity and value in such a small space commanding in some cases millions of dollars at the auctions is very attractive for luxury buyers, who don't have to be concerned with the costs of storage and insurance of large items like cars or paintings.
- Estate Planning - Consider the acquisition of a small cache of colored diamonds that can be passed from one generation to the next. Depending on the number of heirs, more stones with less unit value may be needed.
- Price Stability - The majority of the important coloured diamonds are in strong financial hands, whether it be the dealers/jewellers or the investors/collectors who own them. Even in a severe recession, owners of fine coloured diamonds who need money will sacrifice or discount their common merchandise or other assets first. Fine coloured diamonds are so hard to substitute that anything that can be replaced more readily will be sold first.
- Long Term Growth - Because of the rarity, decline in supply and the steady increase in demand for quality colored diamonds, prices should continue to rise for the next decade. It is important to recognize that colored diamonds are still new to the general public and the potential for new buyers in the next decade is significant, while the supply stream is finite.
Colored Diamond Rarity
Natural colored diamonds represent one of the most concentrated forms of wealth in the world. After all, you can transport diamonds in your pocket. They are extremely rare, with only 0.001% of diamonds mined in the world each year are colored diamonds.
For every 10,000 carats of diamonds mined, it is said only one carat of colored diamonds is found.
While it is true that all natural colored diamonds are rare occurrences, the astute colored diamond collectors, investors, and jewelry buyers know that there are differences in rarity among different colors. In other words, certain colors are more or less rare than other colors.
In addition, investors must also understand which diamond colors are “perceived in the commercial marketplace” as being more rare than others.
|Extremely Rare||Notably Rare||Modestly Rare|
In the colored diamond marketplace — where buyers compete against one another to own the so-called “best” stones for their collection and/or portfolio — knowing the order of colored diamond rarity from “least rare” to “more rare” is an important step in determining a diamond's present and potential value.