For more than 100 years, unless you were an industry insider or had connections to DeBeers, the prospect of investing in diamonds was completely out of reach. However, for the first time in history, diamond prices are no longer manipulated and are now a product of true market forces, providing investors with a long awaited opportunity.
Diamonds are not just a “girl’s best friend,” they’re also the next golden opportunity for millions of individual investors seeking safety and performance in this uncertain global economy. Investors can now buy, take physical delivery, track real-time prices, and liquidate their investment-grade diamond positions effortlessly.
And even better – prices are expected to spike soon.
So what happened over the last 100 years to make such an opportunity possible? The short answer is that natural economic forces will always prevail over any one company’s power and influence.
It all started in the second half of the 20th century when DeBeers began to lose its control over the diamond market as a result of major mines being discovered in Australia, Canada and Russia. These discoveries made it difficult for DeBeers to purchase all of the rough diamonds on the market, in turn weakening their ability to influence supply and prices in their favor.
Over time, more and more diamond producers began to bypass the DeBeers cartel by selling their supply directly to the market. By the late 1990’s the DeBeers market share had eroded to 60 percent, a far cry from the 90 percent share it enjoyed in the 1980’s.
By 2004, the DeBeers stockpile was depleted, allowing diamond prices to trade on supply and demand fundamentals, just like any other commodity. Currently DeBeers has a market share of less than 40 percent.
So why should an individual investor care about these major structural changes to the diamond industry? Well… because allocating diamonds to their investment portfolio may well be one of the best investment decisions they can make.
According to a study released by Bain and Company in 2011, it is projected that there will be an additional 276 million middle class households in China and India by 2020. This influx of consumers is anticipated to fuel record setting diamond demand for years to come.
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