Why dealing in diamonds still hasn’t lost its sparkle
AMELIA MURRAY reveals the tricks of the trade if you fancy investing in jewellery
THE time is not even 11am, and I have five diamonds worth £1 million on the back of my hand. One of them, a small pink stone, is valued at £700,000 alone. You’d think I’d be surrounded by armed guards, but the security in this showroom in London’s West End seems pretty minimal considering. I must have a trustworthy face — either that, or Tobias Kormind, founder of bespoke jeweller, 77 Diamonds, doesn’t think I can run very fast.
Most people come to buy jewellery for themselves or loved ones, Mr Kormind tells me. But many are now also considering diamonds as an investment. During times of instability, investors often look to more tangible assets such as gold and gems.
However, investing in diamonds can be risky, and there are limited options outside of buying jewellery. And compared to stocks and shares they haven’t performed nearly as well.
For example, over ten years the Polished Prices Diamond Index, which tracks the price of diamonds bought and sold, has increased by just 2.5pc. By comparison, an index of global stocks has risen by almost 200 pc over the same period, according to the MSCI World index.
But diamonds can be worn without affecting their value. Laura Suter, personal finance analyst at investment firm A.J. Bell, says: ‘Unlike shares or bonds, you can get enjoyment out of wearing diamonds as well as potential profit. Many people also buy diamond jewellery to pass down to younger generations.’ So how do you find a good diamond? Buyers are urged to remember the five Cs — carat, cut, colour, clarity and certification. These are essentially all grades of quality. Different variations of these elements can result in diamonds that look of a higher quality than they are.
Carat is the weight of the diamond stemming from ancient times when jewellers used to compare the stones with carob seeds, which weighed 0.2 grams.
Some carats are more popular, which is important if you are planning on selling it on. Mr Kormind says: ‘The cost jumps up when you get to certain weights because that is where the demand is. So if you are looking to invest, go for 0.5ct, 0.7ct, 1ct, 1.5ct, 2ct, 3ct and so on, because these will be what people are looking to buy.’
The bigger the diamond, the rarer it is considered to be, which makes it more valuable. A 2ct diamond could cost four times more than a gem half the size.
HOWEVER, there are ways to cut the price if you are just looking to wear the jewellery, or pass it on to loved ones. For example, a 0.9 ct diamond could cost up to 30 pc less than a 1 ct stone but could look larger if it is cut better, according to Mr Kormind. Carats are also associated with gold but instead indicate its purity. A diamond’s clarity refers to its imperfections and blemishes.
According to the Gemological Institute of America, a ‘flawless’ gem is so rare that most jewellers have never seen one. The majority fall into two categories: VS (very slightly marked, or ‘included’) or SI (slightly included) which are difficult to see even under 10x magnification.
A perfect 1 ct diamond could cost £12,000. Whereas one with visible flaws would cost around £1,500, but no buyer or investor would want it, says Mr Kormind.
The cut of a diamond is all about sparkle. You should prioritise this; aim for excellent or very good based on the GIA’s grading system.
Colour can affect the cost. White diamonds are valued according to how colourless they appear. Mr Kormind says a top-quality 0.9ct diamond with a D grade (the best possible according to the GIA scale) could sell for around £3,000.
But if you went for a ‘near colourless’ gem with a G grade, for instance, it could reduce the cost to around £2,200 and look just as dazzling with a good cut and clarity.
Any diamond purchase should have an accredited certificate from an internationally recognised body such as the GIA — not one written in-house by the jeweller or dealer.
Round diamonds are the most expensive shape, with ovals around 30pc cheaper. However, as round ones are more popular, they may be easier to sell. Antique diamonds have a different look and feel. Some may be of lower quality and not have been cut as well as newer ones, so might not sparkle as much. They are unlikely to have been certificated; a professional may need to confirm they are genuine.
But they could command a premium if they have provenance — if they belonged to a member of a royal family, for example.
Auction houses can be a good option for buying diamonds, particularly vintage jewellery. The gems will also have been checked by experts. You may not be guaranteed the best value as auctioneers may try to push up the price depending on interest. You will also pay a buyer’s premium, adding an extra 20 pc.
Mr Kormind says jewellery from High Street chains may be overpriced, but safer. In London’s jewellery quarter, Hatton Garden, you may find the price varies greatly between jewellers, giving plenty of room for negotiation.
Overseas, Antwerp’s diamond district is the biggest wholesale market in Europe, while New York’s 47th Street has lots of jewellers.
Buying individual diamonds requires wealth and knowledge. Chartered financial planner Patrick Connolly, of Chase De Vere, says: ‘The price has fallen in recent years and longer term, the prospects are likely to be correlated to the global economy, so could still face challenging times ahead.’
If you are not buying jewellery, investment options are limited.
You can invest in a few diamond and gemstone mining companies through an Exchange Traded Fund (ETF), a basket of assets such as bonds, stocks and currencies, that can be traded. Actual diamonds are difficult to access this way because, unlike gold or silver, each is unique and valued differently.
If you pride yourself on being an ethical investor, diamonds are probably not for you due to the impact mining can have on the environment and a legacy of human rights abuses.