Are high-quality diamonds kept artificially scarce

Diamonds or gold: which investment is better?

12.3 million euros for 3.814 grams! That was the price that “Le Grand Mazarin”, a 19.07 carat diamond, received at Christie's in November 2017. And that wasn't even the top act on that memorable evening in Geneva. A 163.41 carat necklace was also auctioned - for just under 29 million. Admittedly extreme examples, but they show that diamonds as an investment are more popular than ever. But are they also an alternative to gold? So ring free for part 5 of our popular investment comparison series “Gold vs…”. This time we're sending diamonds into a direct duel.

What is very valuable, very rare, easily transportable, easy to store, indestructible, has a high value density, is in great demand by people and industry and retains its value over time? Right, it's not just gold. The same goes for diamonds. With these properties, they are also recommended as a crisis-proof material asset that offers protection against loss of assets. The comparison of the two opponents promises to be interesting.

Diamonds are… an investor's best friend?


It feels like every second article about diamonds begins with the world-famous song “Diamonds are a girl's best friend” by Marilyn Monroe. The scene is a classic, but only half the story. Because diamonds are more than just jewelry. They always had a function as an investment. There is hardly a ruler, hardly a king, who does not have precious stones in his treasury as an expression of his economic power.

That recently Diamonds as an investment are increasingly in the interests of investors, has reasons. Diamonds are a real asset, and real assets are very popular. Many people are afraid of inflation or see a financial and debt crisis with an uncertain outcome. The protection of assets is gaining in importance. It is obvious that investors are interested in alternatives in addition to traditional tangible assets such as stocks, real estate, raw materials or gold.

Another point contributing to the growing popularity of Diamonds as an investment Contributed is the advent of online platforms that are quite targeted Investment diamonds to offer. Today, the Internet offers interested investors completely different options for information or comparison. You no longer have to go to the jeweler (often the only one in town) like in the past, but can Buy investment diamonds online. Specialized suppliers import diamonds directly from the international diamond exchanges and pass this price advantage on.

Low or negative interest rates also contribute to the fact that investors have been getting out of interest rate products for a long time Investment alternatives search.

Diamonds as an investment: the most important facts

Diamond is the hardest material in the world
This is what makes diamonds important to industry

Diamonds are beautiful
This is what makes diamonds important to the jewelry industry

Diamonds are old
That is what makes diamonds so fascinating. Real diamonds are hundreds of millions of years old. According to experts, the oldest specimens are over 4 billion years old.

Why are diamonds so valuable?
Because they are in demand and because they are rare. Nowadays you can also make them artificially, but the difference can be seen by experts. Investors shouldn't invest in synthetic diamonds, preferring real diamonds.

Carat weight for diamonds
One (1) carat is exactly 0.2 grams, so a 10-carat diamond weighs 2 grams.
In contrast to this, the carat specification for gold is not a weight specification, but describes the fine content of pure gold. 24 carat gold means that 99.99 percent of the weight is gold. It does not matter whether it is a kilo bar of gold or a small gold coin.

The value of diamonds increases disproportionately with size
A 2-carat diamond is not twice as valuable as a 1-carat, but many times more valuable. This is due to the fact that large diamonds are even rarer and therefore more popular than the average.

Classification: The thing with the "C's"
Cut, Clarity, Color, Carat - that is, cut, clarity, color and carat: These are the famous “4 Cs” that are used to assess diamonds and which investors should also use as a guide. Quite a few experts add a fifth “C” to this 4C formula - the “Certificate”.

The certificate is important
Investors should look out for certificates from reputable companies such as GIA (Gemological Institute of America). In the case of larger stones, a laser inscription is also common, which is engraved into the diamond.

The cut is important
Diamonds only develop their true value with the right cut. A masterful cut makes the stone sparkle and awakens the much-vaunted “fire”. There are various types of cut, such as the brilliant cut, the pear cut, the oval cut or the emerald cut, to name just a few. Experts assume that a rough diamond can lose up to 50% or more of its weight when it is cut. Nevertheless, rough diamonds are only conditionally recommended as a capital investment because they do not have a certificate.

Every stone is individual - and thus also its value determination
There is no generally valid official spot price for diamonds, as is the case with gold. When selling, the value of each diamond must be determined individually.

Buying diamonds: where - and which ones?
Buying diamonds is a matter of trust. It is therefore advisable to seek expert advice for investment diamonds. In theory, you can also buy it from a jeweler. But like gold jewelery, diamond jewelery is only conditionally suitable for investment.
It is better to buy investment diamonds from specialized dealers. Usually you can sell your diamonds there again, if necessary.
Diamond dealer Dr. Ulrich Freileben recommends investing only in the best quality:

After decades of experience, the best has always retained its value. We therefore only recommend flawless diamonds in the best white colors (D-G) with the world's most prestigious certificate from the Gemological Institute of America (GIA). A “must” are the “Excellent” ratings in all three cut categories, as well as no “Fluorescence”. For resale, it is important that only the sizes you are looking for are selected (e.g. for single carats 1.01 - 1.03 carats)

Dr. Ulrich Free Life, diamondas.com

Famous diamonds

Cullinan
The largest diamond ever found in the world to date. Weight: 3,106.7 carats. This diamond has been divided into 105 individual pieces

The Pink Star
Currently the most expensive diamond in the world to date, sold for $ 71.2 million in 2017

Lesedi La Rona
1109 carats, sold for $ 53 million in 2017

Koh-i-Noor
186 carats, first mentioned in a document in 1304, exhibited today in the Tower of London

Hope diamond
45.52 carats, first mentioned in 1642, today in the National Museum of Natural History in Washington DC. Sun King Louis XIV is said to have owned it too.

Diamonds vs. Gold: The Comparison

After classic cars, real estate, stocks and Bitcoin, now oursComparison gold vs. diamonds: Who will come out on top in the end? As usual, we will again have the two opponents compete in a “battle” round by round. We rated the following individual disciplines:

  • Asset protection
  • Current income
  • Value density
  • Potential returns
  • volatility
  • Fungibility
  • simplicity
  • Denomination
  • anonymity
  • tax
  • mobility
  • Investment costs
  • Doubtful origin
  • Emotional return
  • Exchange rate risk
  • Physical security
  • Independence from interests
  • future

Round 1: Asset protection

Securing assets is the primary purpose of Real assets. Monetary values ​​can be devalued by inflation, issuers of bonds or other financial products can become insolvent, and companies can go bankrupt. One expects a real asset to preserve wealth over generations and that there is no worst case “total loss”.
This is the case with gold. It has always retained its value over the millennia. A total loss is excluded.
But the same is true for diamonds. Point for both.

Our conclusion: a tie, point for both

Round 2: Current Income

Neither gold nor diamonds can offer rent, interest, dividends or similar current income. They don't grow either. We do not award any points.

Our conclusion: a tie, no point

If you put the value in relation to weight or volume, then diamonds far outperform gold. The “Le Grand Mazarin” embodies a weight of only 3.814 grams and is currently valued at 12.3 million euros. For comparison: Our gold calculator calculates just 132 euros for the same amount of gold (as of early December 2017, the current price can be re-calculated at any time with our calculator).
Admittedly, such a well-known diamond is an extreme example. But that doesn't change anything about the argument itself. This round goes to diamonds

Our conclusion: point for diamonds

Apart from the fact that gold, like diamonds, should not primarily be viewed from the perspective of “return”, price developments and chart developments of asset classes over a longer period of time are always relative. Depending on the period chosen, one type of investment will look better in the course of the course, or the other.

In addition to that, there is no uniform index for diamonds gives. There are various markets and various indices, such as the Idex Diamond Index or Rapaport. In addition, diamond prices are dependent on several factors, such as carat, color or clarity.

But that is exactly what sums it up: It is difficult for non-experts to understand developments in value and prices on the diamond market.

The following chart comparison can therefore only be an example.


Comparison of price development diamonds - gold

In the above period, gold, 1-carat and 5-carat diamonds (“D-IF” quality) show a steady increase in value. But gold has the better performance.

Our conclusion: point for gold

Volatility means the strength of price fluctuations, both upwards and downwards. In contrast to stocks, gold and diamonds are generally considered to be a good recommendation from this point of view. Those who want to sleep peacefully are well served with both.
In our chart above, the volatility is at Diamond price history but even better than gold. The main reason is that the diamond market is not regulated by a stock exchange. The diamond trade is still carried out physically and is therefore less susceptible to speculation or even price manipulation.

Our conclusion: point for diamonds

Fungibility means how easily a good can be traded. In the case of financial investments, this primarily means how quickly the invested capital can be turned into money. After all, an unforeseen emergency situation can affect anyone. A large market with many market participants and price transparency are helpful here. However, a large market does not necessarily mean that something can be sold at a good price in a short period of time.

There are basically two options for selling gold and diamonds. On the one hand, there are portals that buy online. The dispatch, the assessment by the buyer and the subsequent money transfer - in theory, the process is the same. The money is in the account within a few days.

On the other hand, there is the Cash salein a shop or branch around the corner. It can be done even faster. In principle, gold, like diamonds, is easily fungible. If necessary, both can be exchanged for money, goods or services in the last jungle village. Looks like a draw at first. The difference is in the details.

An ounce of gold is always an ounce of gold. There is a worldwide spot price for gold that is updated daily and that everyone can use for orientation. This stock exchange price is available to everyone. Gold is therefore not only coveted, but can also be traded all over the world at a transparent price. Everyone can understand what a 100 gram gold bar is worth and compare prices. You can compare online and sell to the dealer with the best gold buying price.

It is different with diamonds. A 1-carat is not always a 1-carat. No stone is like the other. An individual assessment must be made for each diamond. It can even happen that two experts give different ratings for the same stone. So the diamond must first be examined before you can get a price offer. But what if the seller does not agree with the price? Then you have to laboriously obtain a second offer.

Selling gold is therefore easier, usually a little faster, and the local buying options are often better, as many banks also buy gold.

Our conclusion: point for gold

Every child understands what gold is. Provided there are reputable dealers, anyone can buy gold. You don't need an expert to buy gold.
The situation is different if you want to buy diamonds. What should I invest in? A large 2-carat, many half-carats, or even a mix? Fancy diamonds, brilliant cut or pear cut? Color classification “F” or rather “D”? Which diamond class is particularly fungible? The assessment of which diamonds are best suited as investment diamonds requires specialist knowledge, as does the classification according to the 4 Cs. Colors, sizes and cuts can be subject to fashions, markets should be able to be assessed. Advice on buying diamonds is advisable for investors.

Our conclusion: point for gold

By this we want to understand how low-threshold entry into the investment can be. This is also under the aspect of Cost-average effect important. According to this theory, it is better to invest in an asset class more often and in small amounts over a longer period of time, rather than one-off with a large amount. Investment experts point this out again and again.
A small denomination can also be an advantage in the event of a later sale.

Everyone can start small with gold. If you want to buy the well-known Krugerrand and don't have enough money for the classic ounce, there is also the 1/2, 1/4 or 1/10 ounce. A 1/4 oz Krugerrand costs around 285 euros as of December 2017. An amount that is not an insurmountable obstacle even for small investors or even a student. Although the proportional cost factor for the acquisition costs increases with small gold investments, these are also manageable.

It is different with diamonds. Many experts advise starting with at least half carats. However, as of December 2017, a half-carat of the best quality costs well over 3000 euros. You can also start with a third carat, but even these are currently hardly available in top quality for less than 1000 euros (see www.diamondas.com). For single carats you should calculate with 5 digits. And if you even want to invest in a 2-carat, you should first deal with the term “cluster risk” (= a large amount of money tied up in a single asset). Quite apart from that, the question What do diamonds cost is difficult to answer for laypeople anyway. Expert advice should always be consulted when buying diamonds.

Our conclusion: point for gold

It's like gold here. You can buy anonymous diamonds up to an amount of 1,999.99 euros from a dealer as a so-called anonymous over the counter shop. And you can sell diamonds anonymously, but then only privately.

Our conclusion: a tie, point for both

In private sales transactions, gold profits are no longer subject to taxation after a minimum holding period of one year. So if you sell gold at a profit after one year, you can reap the full profit. Will be sold before this one year period, thenan exemption limit of 600 euros applies to winnings. If this limit is exceeded, tax must be paid at the personal tax rate.

The same goes for diamonds. But: When buying diamonds, in contrast to buying gold, 19% VAT is added on top. A significant disadvantage for private investors. Because this increases the cost of the investment by 19%. This money first has to be earned by increasing the share price if the bottom line is that you don't want to make a loss. Although there are providers who offer VAT-free storage abroad, this is unlikely to be a real alternative for most of them.

Our conclusion: point for gold

Gold can be transported easily. But diamonds are much lighter. And that is to be taken literally, because if you take the same value as a basis, then diamonds weigh only a fraction of what gold weighs or size on the scales. To stay with our example of “Le Grand Mazarin” again. This stone is currently worth 12.3 million euros and weighs just 3.8 grams. Something like that can also be sewn into the hem of the coat.
For comparison: 12.3 million would be more than 350 kilos of gold at the current gold price (as of the beginning of December 2017). You need a forklift truck.

Our conclusion: point for diamonds

We want to understand investment costs as all costs that are necessary to buy, maintain, store and sell an investment. In other words, costs that are added to the actual investment amount.
If you don't want to hide, you have to invest in a locker or safe with gold, just like with diamonds.
But with diamonds it is Spread, i.e. the spread between the purchase price and the selling price, is slightly higher. In addition, one must not forget that when buying diamonds, unlike gold, VAT is added.

Our conclusion: point for gold

Round 13: Doubtful origin

Blood diamonds and blood gold are outlawed around the world today, and much is being done to stop them altogether. When it comes to diamonds, governments, the diamond industry and civil organizations in the so-calledKimberley Process to certify conflict-free diamonds.

Similar to gold. There is that here Fairtrade gold seal for gold, which is mined and traded under fair social conditions. In Germany, for example, the organization TransFair (Fairtrade Germany) awards such a seal.

Nevertheless: child labor in mines, civil wars financed with diamonds or gold in countries of origin cannot be completely ruled out. We do not award any points.

Our conclusion: a tie, no point

Round 14: Emotional return

If you compare investment diamonds with investment gold, then sparkling diamonds are each unique, for most people they are probably more beautiful to look at than a sober kilo bar of gold or the usual bullion coins. This is especially true when you give a beautiful stone from your diamond collection to the jeweler you trust in order to have a special gift made from it.

Our conclusion: point for diamonds

Round 15: Exchange Rate Risk

The gold price is fixed in dollars. The dollar is also the key currency for measuring diamond prices. So here both opponents don’t give each other anything. The investor should note: Depending on whether the euro is weaker or stronger compared to the dollar, diamonds or gold bought in euros can be “worth” more or less.

Our conclusion: a tie, no point

Round 16: Physical Security

Gold defies water, fire or earthquakes, and it lasts for centuries buried in the earth. If it is dug up again, it still has value. Diamonds too.

Our conclusion: a tie, point for both

Round 17: Independence from Interests

Those who think in a security-oriented manner want to be as independent as possible from debtors, banks, states, legal regulations or other third parties. Interest rate products depend on the general financial climate. Bonds and similar constructs depend on the issuer's solvency. Shares depend on the economic situation. Funds depend on the competence and seriousness of the fund manager. Gold depends on - nothing. You buy it and you own it. The same goes for diamonds. Would actually be a draw.

But now there have been several examples of gold bans in history, for example in the Weimar Republic or in the USA in 1933. The possession and trading of gold was subject to more or less strict legal regulations by the state.

We are not aware of any diamond bans for private investors.

Our conclusion: point for diamonds

If something is subject to high demand due to its versatile uses, this generally has a positive effect on its value. For both diamonds and gold, there is a high demand on the part of industry and the jewelry sector.

Gold cannot be produced artificially. This ensures that it remains tight.

Artificial diamonds however, it has been around for a long time, and knowledge of the technology to do this is growing. To understand: Synthetic diamonds are identical in composition and properties to real diamonds. The only difference is that in the laboratory one reproduces the earthly creation process of nature. False diamonds are indispensable in the industry; what influence they will have in the jewelry industry in the future is uncertain. Will it be possible one day to produce artificial diamonds that can no longer be distinguished from real diamonds?

We have diamond wholesalers Dr. Ulrich Free Life asks: "In our increasingly technological world, we consider it very unlikely that natural diamonds can no longer be distinguished from synthetic ones. However, we observe that the unlimited multiplication of synthetically produced diamonds means that the price level will only be around 20% of natural diamonds . A second, independent market will emerge, which will function according to completely different rules than those for the natural, two billion year old mineral ", so the expert.
Nevertheless, we can already see a small element of uncertainty there.

Our conclusion: point for gold

Conclusion: 10: 8 for gold


Investment comparison: diamonds - gold

Close race: Gold like diamonds generally do a good job as a defensive security anchor in wealth planning. They should therefore also be evaluated primarily from this point of view. Both are not good for short-term speculations on the run.

The maxim of our clients is to position their assets as broadly as possible in these times. Material assets are given ever greater weighting. Anyone who includes diamonds in their portfolio is looking for long-term security and mobility for their values. Stability is more important to them than returns. According to our information, our customers already own papers, real estate and precious metals if they decide to add diamonds.

Katja Herrmann, Freiherr-diamonds.com

What is also noticeable: gold and diamonds have a lot in common. This raises the question of the correlation with other asset classes. For those who already have gold, the aspect of “diversification” is put into perspective.

The points “fungibility”, “availability”, “tax” or “future” should be of particular importance to the average real asset investor. Here we see gold in front.

But this does not speak against diamonds. As an admixture in larger depots, they are definitely worth considering. But diamonds can also be a useful addition to the portfolio for lovers who may have some expert knowledge. There is no such thing as THE best investment. There are only types of investment that are better suited to the respective investor. That must be decided individually in each case. Our Investment comparisonshould help to find the best personal decision here.

Diamonds or gold: what do you think?

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