Yet another world record diamond price was achieved last week at Sotheby’s Geneva Sale of Magnificent Jewels continuing the spate of world record prices for diamonds achieved over the last two years. The surge in diamond prices in the face of the overall turbulent economic environment has grabbed the headlines and has left many analysts left to grapple with why diamond prices continue to rise during such uncertain economic conditions.
Last week’s sale of the spectacular pear-shaped fancy vivid yellow diamond of VVS1 clarity and weighing 110.03 carats set a world auction record for a yellow diamond when it sold for $12.4 million. Other special diamonds including a 38.88 carat cushion-shaped diamond of top colour and clarity fetched extremely strong prices and the overall auction mustered a very strong sell-through of 82 percent as did the Christie’s Magnificent Jewel sale also held last week in Geneva. Commenting on the auction results, David Bennett, Chairman of Sotheby’s jewellery department in Europe and the Middle East, noted that the “strong sell-through rates are a reflection of the continued strength and resilience of the international jewellery market.” Comments like this are great for headlines in the press but is this really the case?
Despite the perceived glamour associated with diamonds, the international diamond market is actually very intricate and complex comprising numerous sectors and subsectors, each of which not necessarily acting in line with each other. The investment diamond market is but a fraction of the overall diamond market and can be broadly classified as comprising of ‘vanilla’ investment diamonds and special and unique diamonds such as those that reach the international auction market. The sub-market for special and unique diamonds is very small and controlled by a handful of participants who easily dictate the sentiment and prevailing prices. The high concentration of power coupled with it being a very illiquid market make this very specialized and niche sub-sector a market unto itself and not necessarily representative of the broader investment diamond market.
As diamonds emerge as a solid alternative investment asset class there is the propensity for a tremendous amount of misinformation out there giving a skewed perspective of what is actually going on in the investment diamond market. Any prudent investment into the diamond market must be accompanied by a thorough and specialized understanding of the workings of the global investment diamond market in its entirety.
Saul Singer is a partner at Fusion Alternatives Investment Management, an innovative investment house and the leading alternative investment asset manager specialising in investment diamonds. Fusion Alternatives does not hold any diamond inventory and aims to give expert and independent insight into the global diamond market. Visit ww.fusionalternatives.com for further information.
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