Investment Diamonds surgeInvestment diamond outperforms other assets
Investment Diamonds surge, leaving the traditional investment marketstanding. Investment diamond prices eased up a further two percent inJune ending the first half of the year up 17 percent and thusoutperforming the overall investment market.
Considering thatglobal financial markets remained relatively turbulent during the firsthalf of the year, the rise in investment diamond prices is even moreimpressive. When compared to other commodities or even other ‘lifestyleinvestment’ asset classes, investment diamonds faired extremely well. Infact it seems that investment diamonds were only outperformed by coffeewhose price spiked some 20 percent in mid-June on the back of severeshortages.
Investment diamond prices have rallied since January,sparked by a rebound in demand from major diamond consuming marketscoupled with the severe reduction in diamond production that prevailedsince the onset of the global financial crisis in late 2008. As themarkets began to rebound the diamond pipeline was sapped of supply whichin turn caused a scarcity of available goods across all diamond tradingmarkets around the globe. This only exacerbated the already existingdynamic of demand outstripping supply that has been prevalent in theinvestment diamond market since 2003/4.
While gold has beenmaking all the headlines being touted as a superior ‘safe-haven’ assetproducing a return of 14 percent since the beginning of the year,investment diamonds outperformed gold and yet have remained just beneaththe radar screen of the alternative investment community. This is sureto change as savvy investors and investment professionals continue toseek out non-correlated inflation-hedged tangible assets.
Theoutlook looks good for investment diamond prices with annual demandgrowth returning to its natural level of eight to ten percent whileannual production growth will hover around low single-digit figures.This disparity is not set to change in the immediate future as no worldclass diamond mine discovery with the potential to impact upon thesupply curve has been made in the last decade and even if there was tobe such a discovery in the near future it would probably take aroundseven years for the mine to be ramped-up to producing commerciallyviable output levels. Moreover, investment diamond prices are stillbelow the levels reached in the first half of 2008, giving furtherimpetus for the upward price trend to continue.
We expect thepace of the price growth of investment diamonds to ease in the immediatefuture with the summer months traditionally being a slower periodcoupled with the realignment of the demand and supply curves back totheir normal equilibrium bands as more supply enters the pipeline. Giventhe better-than-expected H1 performance we have revised our initial2010 expectations upwards with investment diamond prices expected toreturn approximately 20 percent in 2010.
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