The rising prices in high-end diamonds have not gone unnoticed by the financial markets. On June 24, the first publicly traded polished diamond fund will be launched on the London Stock Exchange. The closed-end investment fund, named Diamond Circle Capital plc, will consist of rare white and colored diamonds.
As mentioned in earlier blog articles, rare diamond prices are exploding as worldwide demand grows at a faster rate than production. In the past, investors who wanted to profit from these increased diamond prices had to purchase shares in diamond mining companies or buy diamonds directly. Diamond company profits are not necessarily growing as fast as prices of high-end diamonds. Likewise, buying and selling diamonds is a risky proposition for the average investor. The new diamond fund will provide investors an easy way to invest in diamonds without having to be a diamond expert or in the diamond industry.
While the upward trend in rare diamond prices seem to be a sure thing, every booming investment seems to be a sure thing just before it crashes. Like any speculative investment, the potential for high rewards goes with very high risks.
The diamond investment fund will be one world-class diamond collections but it is doubtful that it will have any a significant impact on the market for diamonds. However, the launch of this new fund is a clear sign that speculation in diamonds is rampant and speculation is driving a significant part of the current price increases.