This page is about Diamonds as an investment.
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History & BackgroundEdit
In India, diamonds have been used as precious stones for at least 2,500 years, and the religious texts describe them. In the mines of India, some of the best and biggest diamonds of the world were found. In recent times, the popularity of diamonds as a valuable stones and as a medium of investments has risen since the 19th century. Although diamonds are not as liquid as gold or silver, and have been rarely used as medium of exchange, still they have served as a wonderful store for value. Presently, around 20 % of diamonds are used as investments and in the ornaments while 80 % are used in industrial activities. Now-a-days, even use of artificially produced diamons have also increased.
There is many sides of diamond prices and there is no universally accepted price per gram of diamonds as is the case with most of the precious metals. The price depends on many factors like the weight, colour and clarity, cut and shape of a particular piece of diamonds.
Over last several decades, De Beers Group has controlled the world price of diamonds. Presently, Botswana is the largest producer of diamonds and the mines are operated by Debswana, a joint venture between De Beers and the Botswana government. In recent decades, Russia and Canada have also emerged as good producers of diamonds. Still Dee Beers Group continues to have around 80% of market share in world diamond trade and for all practical purpose the Dee Beers Group control the price of diamonds.
Investing in diamonds - methodsEdit
- Polished diamonds
- Generally in the absence of a rather active market, your investing and holding shall remain mostly blocked and can not be liquidated immediately. Issues of valuation also arises depending on the size and the state (like polishing, sharpening and cutting) of the particular piece of a diamond. Synthetic diamonds and the look-like-real ones may also pose threats to the long term value of diamonds, particularly of small weight. Moreover, price shifts and differentials appear very abnormal to lay persons. Despite all these factors adversely impacting diamonds as an investment, people continue to buy diamonds and the passion to own diamonds continue to have a sway over most of the human beings.
- Mining companies
- In fact, diamond mining companies do not represent ownership of diamonds directly - they give you ownership right in that particular company to the extent of your stock holdings in that particular company. In a way, such ownership of a diamond company may also be construed as investment in diamonds. By the way, the largest diamond company is the De Beers, which is jointly owned by Anglo American (45%), the Oppenheimer family (40%) and the Botswana government (15%).
It's often been said, the only two things in life that are definite are death and taxes, and this old saying applies to taxation of diamonds too. Appreciation in the value of your diamonds will attract levy of capital gains tax. Moreover, in most of the countries, dimonds are subject to Value Added Tax and/or Sales Tax.
- "Have You Ever Tried to Sell a Diamond?" - Article in The Atlantic Monthly on the history of diamond marketing