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Natural diamonds as a means of preserving wealth

The concept of diamonds as being of potential benefit for the protection of wealth is a small but important segment of the natural diamond market. The concept of diamonds as assets is nothing new.

Many people see natural diamonds as a valuable gift. An expensive extravagance, perhaps, but also a romantic and symbolic gift to bring happiness to a loved one. We take a wider view and believe that natural diamonds are also a gift with strong emotional appeal. Of course, a further consideration here is the fact that this gift also represents an opportunity for future wealth protection, i.e. a diamond bought as a sentimental gift is also bought as an item of lasting value.

Diamonds are mainly bought for sentimental reasons in the firm belief that the gift is also an asset.

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Prior to the 1970s, diamonds showed a steady and consistent pattern of price appreciation. Diamonds have always attracted the attention of investors. Prices began to skyrocket in the late 1970s and a speculative bubble quickly developed.

Diamond prices followed the trend of many other commodities, including gold and silver. Prices reached an all-time high in the 1970s. Unfortunately global commodity prices soon dropped, whilst a disconnect developed between polished diamond prices and those of gold and other commodities. The prices of polished diamonds continued their inexorable rise.

A new market for marketable diamonds emerged and very quickly became a new and interesting segment of the diamond investment market. To sum up: consumers in the 1980s used diamonds exclusively as a high-cost gem for jewellery; the idea of recognising diamonds as a possible means of wealth preservation was still a long way off.

It was not until the 1990s that wealth preservation by means of diamonds gained appeal. Everyone able to recognise the future potential of diamonds was looking for new sources, especially those seeking to benefit from the new boom outside the diamond industry.

The relentless rise in the value of both white and coloured diamonds caused the market for high-quality diamonds to become extremely volatile, to the extent that firms with no knowledge of the industry participated in this sort of speculative behaviour.

Only a few people are actually able to invest in a selection of exceptional diamonds. The chosen few have made very limited investments and an increasing number of them normally do so anonymously through reputable auction houses.

Of course, it has always been clear to interested insiders that a limited number of diamonds is available. Only a very small community had the means of obtaining any significant information on pricing or quality evaluations.

As a consequence, leading institutions in the USA, Belgium, Hong Kong and Dubai joined forces to issue certificates on the valuation and appraisal of diamonds. In fact, it is general practice to submit certification from a reputable institute in the course of every sale.