Diamonds have always had the image of a safe investment and companies offering “investment diamonds” are now legion. They praise the merits of a perfect investment, tax-free (up to 5,000 euros), and high profitability. But as the financial markets authority recently recalled, this is a very risky investment. Read the press release from the Financial Markets Authority
The investment diamond in the 1970s
The price of a Argyle Pink diamond is not so much related to its rarity as to the ease of negotiation. Indeed, it is a perfectly codified subject, easy to understand, even for the uninitiated. Already in the 1970s, a speculative bubble was created around diamonds which were then sold, including by banks, as a perfect investment.
Many people during this time bought diamonds of all weights and qualities, expecting to make a quick and significant profit. But the reality was very different… In 1985 this bubble burst and the price of diamonds collapsed. Impossible in these conditions to resell the stones ... The owners had to resolve to keep the stones until the price rises sufficiently, which is still not the case.
Then the computer system made its appearance and the proportions of the diamonds were optimized in order to maximize their brilliance, leading to a recutting of the diamonds cut until then. The ideal proportions indeed require cutting stones deeper and of a smaller diameter than diamonds cut in these years. Bringing a diamond from the 70s to current proportions in order to put it back on the market therefore requires re-cutting which leads to weight loss of around 20 to 30% in the worst case.
So much so that a diamond bought in the 70s to 80s is not worth today for resale more than a third of its purchase price at the time (without even taking inflation into account). It is however good to clarify that the perfect proportions of a diamond are now firmly established and will not change in the future.
What about the resale of diamonds
When an individual buys a Pink diamond from a dealer, he buys it at the current price, to the nearest 5 or 10%. But there is usually no mention of the fact that when an individual sells that diamond, traders offer him at best 50% of the price (and much less most of the time). As we said above, the diamond is not that rare, and a trader will easily find a diamond equivalent to the one offered to him. He must therefore find a financial interest in putting it in stock without knowing when he will have a demand for this stone.
So a stone that was worth $ 20,000 10 years ago is actually worth around $ 22,000 now, but will be bought for $ 11,000 at most, a loss of at least 45% out of ten. years… In addition, VAT is lost on resale, and a tax of 8% applies above 5,000 euros.
We should add that the diamond price is expressed in dollars, which can strongly impact its price in euros. So, if you buy a diamond when the dollar is strong, and sell that diamond when the dollar is weak, the loss is even greater.
The investment diamond since the 2000s
After slowly recovering until the early 2000s, the price experienced a sharp rise. But like all commodities, the diamonds Investment is experiencing rises, sometimes strong over short periods, but also experiencing equally significant and rapid drops.
As you can see from the graphs at the bottom of the page, the price of diamonds rose sharply until 2009, then fell significantly following the financial crisis. It then experienced a new phase of strong growth from 2010 to 2012. But the increases experienced by diamonds during the 2000s were only supported by significant Chinese demand. Since 2012, the slowdown in its activity and anti-corruption laws have directly impacted the diamond market.
For example, stones of 1 carat have lost almost 35% of their value and are hardly worth more than in 2007. And in the case of stones of 2 carats and more, the increase over 10 years is actually only from 20 to 30%! And this only concerns the whitest and purest diamonds. Current quality stones have increased by just 10 to 15% over ten years.
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