Should You Invest in Certified Diamonds?

 Diamonds
 

Investors are in a quandary about where to put their money. The real estate bubble has burst.  The stock markets are falling.  Economic experts say the global economy is teetering on the edge of a grand recession.  What's an investor to do?

Precious Metals And Gemstones

When wise investors don't trust the economic system created by humankind, they look to the assets Mother Nature creates: precious metals like platinum, gold, copper and silver, and precious gemstones like certified diamonds.

What Are Certified Diamonds?

Diamonds are made of pure carbon, the hardest natural substance known to exist on Earth.  These gemstones are so valuable because mining them is expensive and labor intensive, and the mining process yields uncertain results.

Experts estimate that workers must mine and process up to 250 tons of ore to produce a one carat, gem quality stone suitable for use in jewelry.  Only about one-fifth of all mined stones are considered to be of gemstone quality.  These gemstones are cut and faceted according to specifications to enhance the natural properties of the gemstone, and these stones are then used in the jewelry business.  The other four-fifths of mined stones are used for diamond saw blades, miscellaneous cutting instruments, and other industrial applications.

Grading

Gem-quality diamonds are graded from based on color, clarity, cut, and carat weight. Color grades range from "D" to "Z," with a perfectly colorless stone receiving a grade of "D", and a yellow stone being graded "Z".  Investors seek stones graded "I" or better.

The clarity grade measures imperfections that affect the purity of the stone.  Internally flawless diamonds receive an "IF" grade, while flawed diamonds receive an "I3" grade.

Cut refers to the shape of the stone: round, heat, marquise, pear-shaped, emerald-cut, oval, and radiant.  Carat is the standard unit used to measure the weight of a diamond.  One carat is equivalent to 200 milligrams.

Who Certifies Diamonds?

Investment quality certified stones are certified by independent laboratories whose business is to certify gemstones, not sell them.  Most gemstone wholesalers and brokers insist on certification by either of the two most reliable certifying bodies in the business: the GIA, or the Gemological Institute of America, and the EGL, European Gemological Laboratory.

How Much Do They Cost?

Certified diamonds are a trading commodity, so their prices can vary.  The rarity of high grade certified stones is reflected in their price.  An "E" grade, half-carat, emerald cut diamond can cost nearly $1,300, while an "H" grade, three-carat emerald cut diamond can cost more than $24,000.

Will They Increase In Value?

Like any investment, certified gemstones fluctuate in value.  Generally speaking, larger gemstones will increase in value faster than smaller stones, so investors should purchase the largest certified stones they can afford rather than investing in quantities of smaller diamonds.

Economists report that certified diamonds have provided a 30 percent return on investment over the last five years, and that rate of return is expected to increase another 10 to 20 percent in the next few years.  With wealthy, cash-rich Chinese investors entering the market in the near future, some analysts have predicted a 100% increase in prices of certified diamonds in the next five to ten years.