diamond news, page-311

While gold, silver and other precious metals are subject to greater fluctuations due to geopolitical and global factors, diamonds can provide greater protection and offer a respite for investors. The average price volatility (according to Bain & Co.) of polished white diamonds between 2004 and 2011 – encompassing the 2008 financial crisis – was only nine precent and for coloured diamondsvirtually zero.
Diamonds exhibit low and stable correlations with traditional financial market assets, and lower correlation with precious metals that the metals show with one another. The result is that diamonds can and do offer a superior portfolio diversification when maximizing risk adjusted rate of return is the goal.
When you combine lower volatility with low or stable correlations to traditional asset classes, historical strong performance, and excellent upside potential, diamonds in a portfolio makes an excellent choice.

One of the biggest concerns about investing in diamonds  is that diamonds are valued subjectively using cut, color, carat and clarity — the “four Cs”. Unlike gold or silver, they have no simple cost-per-ounce valuation system. But according to KPMG’s Quarterly Commodity Insights, consumer demand for diamonds is anticipated to grow by 35 percent with both India and China increasing their share of diamond demand. The report also highlights the lack of consistent diamond resources, which could affect the price of diamonds.
As a result, diamond prices are expected to climb with the gap between supply and demand expected to be in excess of seven million carats by 2020.
KPMG estimates that “From 2014, rough diamond prices are expected to grow five to seven percent per annum till 2020, as growing demand from emerging markets is expected to outstrip supply.”
Consumer demand in both India and China are driving the upcoming supply shortage. “investment bank Goldman Sachs forecasts demand for polished diamonds will continue to increase due to the growth of the middle class in China and other emerging markets. The bank predicts that diamond prices will rise as the number of wealthier people grows…” Goldman Sachs, December 2013.
The Chinese middle class as adopting the diamond engagement ring tradition, as seen previously in North America and Japan. At an unprecedented growth rate of the middle class in China the future for polished diamonds remains strong. “it appears China is adopting jewelry busing culture in a way that Japan did from the late 1960’s” RBC Capital Markets – Diamond Industry Outlook May 2013.
As a result of the Indian government imposing an import tax on gold the Indian middle class has shifted from buying gold as a store of wealth to buying polished diamonds.
These two factors, combined with a coming shortage of supply make this an opportune time for investing in diamonds.

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