The Future Price of Diamonds

Anyone who reads the news today knows that the financial world is experiencing some major changes. The unclear economic situation in the US and several European countries is causing some uncertainty in the markets. As experts in the field of fancy colored diamonds and the diamond market, we can see that many investors are looking for safe havens in which to invest their money.

Some say gold is looking solid as its price is on a steady rise. On the other hand, the price of diamonds so far has been quite stable, with prices back to what they were in 2008 and in some categories even higher. The big question remains: are diamonds a safe avenue of investment for the future? The information we bring here was collected from research conducted by BMO Financial Group, which casts some light on the subject:

 

Diamond production reached its top volume in 2006 to 160Mcts (million carats). In 2008 it was 150Mcts and in 2009 109Mcts due to the economical situation and public demand. Experts today do not believe that production can rise in the future to over 160Mcts. The main reason is that no significant new mines have been found in recent years. The ones that were found cannot replace the key mines in African and Russia. Some of the large mines are expected to lose some of their production since the mining there is supposed to go underground (end of open pit production).

Worldwide diamond demand is expected to double by the year 2020. It means that by that time the prices of rough diamonds are expected to increase by about 5% per year, due to the fact that mining production cannot be doubled as well.

 

Thanks to this price increase in rough, polished diamonds prices will rise as well. There will be some balance between public demand and rising prices, but there will still be a higher demand for diamonds and therefore a high increase in prices.

In regards to Fancy color diamonds, rarity is still a major aspect to consider. Red, Blue and Green colors are still rare and Argyle mine in Australia is supposed to stop operating in about 17 years. This means that most of the trade will be of existing diamonds, which will consequentially cause the price of pink diamonds to rise.

 

***Note: Since we are not financial advisors, one should not consider these points as an investment advice. In addition, the economic changes we are now experiencing were not taken into consideration in the time that the research took place.