Coloured diamonds might not be a great investment as they are very hard to sell, according to experts

Written by Ray Clancy

Thursday, 15 April 2010 08:38

Investing in coloured diamonds is a risky business that is just like taking your money to a casino, it is claimed.

Since March 2009 the diamond industry has experienced double digit growth figures for rough diamonds combined with sharply slashed production figures as a result of the global financial crisis.

This has led to a plethora of articles recommending investors to invest not only in mining companies and natural resources funds, but in buying loose diamonds of five to 20 carats. Fancy coloured diamonds are regularly singled out in the press as particularly interesting investments.

But according to Adrie van der Luijt, of Diamondmanufacturers.co.uk, a lot of the advice is nonsense. ‘You could be forgiven for thinking that this kind of advice aimed at investors is written by experts and that blue, pink, yellow or red hued diamonds are therefore an excellent investment opportunity,’ he said.

‘Diamonds of five to 20 carats will command better premiums but they are extremely difficult to resell even for major diamond manufacturers,’ he explained. Even the Diamond Trading Company (DTC), the rough diamond sales and distribution arm of the De Beers Family of Companies, can’t always command a good price for these kinds of diamonds despite being the world’s largest supplier of rough diamonds, handling approximately 40% of supply by value.

‘It’s a bit like buying a house for £200,000 that is now worth £1 million. If there are no buyers for it and you can’t sell it, it doesn’t really matter,’ added van der Luijt.

He warned investors that natural colour diamonds, blue, pink, yellow and red, are very difficult to buy at a realistic price, because a slight difference in colour tint can sway prices dramatically.

‘There are also far too many colour treated diamonds being sold as natural colour diamonds. Some treatments are so advanced that not even the latest tools can detect them. Even some of the most knowledgeable firms have made mistakes purchasing these colour treated diamonds,’ he explained.

‘Although loose and coloured diamonds undoubtedly can make attractive investment opportunities, investors must be aware that the risk involved means it’s like taking your money to a casino,’ he added.

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Comments

+3 #2 Mike Fern 2011-09-16 10:24

Nonsense. A diamond is like any other commodity. There are many hundreds of thousands of buyers and sellers. With numbers like these, it is easy to sell any sized diamond. This is especially true in this era of the internet. ANYTHING can be bought and sold - at a profit ifg you're smart.

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+1 #1 Kati 2011-02-11 16:11

‘It’s a bit like buying a house for £200,000 that is now worth £1 million. If there are no buyers for it and you can’t sell it, it doesn’t really matter,’ added van der Luijt. -- Quoting this para, I just wanted to say I cannot agree - there may be a thousand other houses that look BETTER than yours BUT there are only a couple dozen other Pink Diamonds and if you have one - you are known! Supply and Demand would have to play an important factor here, whereas buying a House - well - you just have too much competition! Good post though :)

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