Pink Argyle diamonds worth a pretty penny

Today there are less than 100,000 carats of pink diamonds in existence, making pink diamonds extremely rare.

• By James Gerrard
• 2:06PM November 15, 2021
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With Rio Tinto having auctioned off the last of its pink diamonds from the now closed West Australian Argyle diamond mine, investors have been busy buying up pink diamonds, with prices of the most desirable stones increasing by 39 per cent over the past 12 months.

Speculators and specialist investors have been attracted to pink diamonds due to the sense of scarcity: about 95 per cent of the world’s pink diamonds production came from Rio’s Argyle mine. And to put into perspective how rare pink diamonds are compared to normal diamonds, only one in every 10,000 diamonds produced from the Argyle mine were pink in colour. So from the 865 million carats of rough diamonds pulled from Argyle over the past 37 years, about 86,500 carats were pink diamonds. (Carat is the unit of diamond weight.)

Moreover, what started as a very specialised area is now open to more investors as a secondary market for these rare stones emerges (in other words, the ability for any investor to buy and sell).

Today there are less than 100,000 carats of pink diamonds in existence, making pink diamonds extremely rare. The annual volume of clear coloured diamonds mined last year was more than 110 million carats, making normal diamonds seem relatively common in comparison.

Yet, despite significant marketing and advertising for the sector, the main problem today for prospective pink diamond buyers is that most of the higher-quality stones have already been purchased and are now stored away under lock and key, owned by investors with no intention to sell them any time soon.

Are pink diamonds investable? Sydney jewellery designer Alice Wong from Lovelle Jewellery says: “When it comes to pink diamonds, size matters, but colour matters more. Although a pink diamond is extremely rare in itself, there are some pink diamonds that are more sought after and command higher prices.

“For instance, an entry-level investment grade pink diamond will cost between $10,000 and $15,000 for approximately 0.9 carats and will be light pink in colour. However, a more desirable deeper pink diamond will sell for over $100,000 and will be a fraction of the size; approximately 0.1 carats.”

In contrast, spending $100,000 on a clear diamond would get you the best qualities and be a whopping three carats in size. Although traditional clear diamond prices have been trending upward in recent years, the prices of pink diamonds have been appreciating at a faster rate due to the heightened rarity factor.

But before rushing out to buy a pink diamond to add to your portfolio, there are a few things to consider. Wong says: “Argyle diamonds are more desirable than pink diamonds from the other mines across India, Russia and Brazil. As such, having an Argyle diamond certification is an absolute must for any pink diamond investor. The certification number is also laser inscribed onto the diamond for extra security.”

If buying a pink diamond in your SMSF, it will be classified as a “collectable” and special rules apply. This includes having the pink diamond appropriately stored and insured. The diamond also cannot be used for personal use (such as special events) or leased to a related party of the SMSF.

Caution also needs to be taken around the term “Argyle”. Wong says: “Some pink diamonds may be advertised as Argyle diamonds but are not ‘certified’ Argyle diamonds and this has a big impact on their value.”

Referred to in the trade as “parcel diamonds”, these diamonds come from bulk lots that are sold by weight. Diamond dealers pick out the better stones and sell them individually as Argyle but they may not have Argyle certification.

Thinking about why the price of precious stones has increased over the past few years, it can be partially explained by record low interest rates. With interest rates on term deposits not even keeping up with inflation, there is not much of an opportunity cost in holding a diamond, sapphire, ruby or emerald. However, when interest rates start to rise, we may find owners of pink diamonds start to cash out and convert their stones into income-bearing investments, which may put a brake on prices down the track.

But until then, for the foreseeable future the upwards trend in pink diamonds prices and other precious stones is likely to continue.

And if history is any indicator, pink diamonds have been a proven performer over long periods of time. Since 2005, pink diamonds have seen an average yearly gain in excess of 10 per cent.

Wong says: “It is simple demand and supply when it comes to pink diamonds. Now that supply has ceased from the Argyle mine and the final diamond auction has occurred, the continued demand for pink diamonds from both consumers and investors may push prices higher and result in record sale prices in the secondary market that we’ve never seen in the past.”