Digging Through Data on Diamonds as an Investment

David Bennett, worldwide chairman of Sotheby’s International Jewellery Division, selling the Blue Moon of Josephine in Geneva in November 2015. Courtesy of Sotheby’s
Guest Luxury Expert Contributor Ehud Laniado is a global diamond expert and seller of two of the four most expensive diamonds sold in the history of Sotheby’s. He explains why diamonds are a viable long-term investment.

opinion piece by Ehud Laniado, Chairman of Cora International —————————

One of the most satisfying moments in my career to date was the night I was privileged enough to sell a 12.03 carat blue diamond, the Blue Moon, at Sotheby’s in Geneva for $48.5m in November 2015.

The diamond still holds the world record for the highest price paid per carat for any diamond ever sold at auction – $4.1m. Within minutes of the diamond selling, it was announced that the new buyer would re-name this dazzling, ocean blue diamond the Blue Moon of Josephine, in honour of his then seven year old daughter. Now if that’s not an investment for the future, I don’t know what is.

Ehud Laniado, chairman of Cora International

Diamonds Are Worthy Investment Assets But Better Consumer Understanding is Needed

In the last couple of years, I have noticed a growing set of wealthy individuals who believe diamonds are worthy investment assets. But many people who are potential diamond investors do not yet understand how rare diamonds actually are and how they are priced and this can put them off. I believe this is one of the biggest challenges now facing the diamond industry.

I began my career in diamonds in my 20s over 40 years ago in the Central African Republic where I bought rough diamonds from individual miners extracting diamonds from the ground, while I lived with my young family in the heart of the jungle. From the start, I was fascinated with predicting the price that a rough diamond would command once it reached its optimum polished form. After my company Cora International acquired the Blue Moon from South Africa’s Cullinan mine in 2014, I applied my specialist knowledge. I and my craftspeople spent five months assessing the Blue Moon and developing 30 possible models, cutting and polishing each one differently to optimise the size and purity of the diamond until the perfect solution was achieved. To create a vivid, blue 12 carat internally flawless diamond really is as rare as a blue moon. We displayed the diamond in the Los Angeles County Museum of Natural History before putting it on the block at Sotheby’s.

World-record breaking diamonds sold by Ehud Laniado

Blue Moon of Josephine, a 12.03 carat flawless fancy vivid blue diamond, sold in November 2015 at Sotheby’s Geneva for $48.5m, which retains the world record for the highest price paid per carat for any diamond at auction ($4.1m)

Unique Pink, a 15.38 pear-shaped fancy vivid pink diamond, sold in May 2016 at Sotheby’s Geneva for $31.5m, the highest price ever paid for a fancy vivid pink diamond at auction

I owe my business success to the diamond industry and I believe diamonds are not just a miracle of nature of the highest order, they are also a viable long term alternative asset. I would go so far as to say that when the time comes that the public fully understands the true value of diamonds, their true rarity and the way they are priced and sold, then the owner of the Blue Moon of Josephine, or shall I say her father, will understand how little he paid for it. After all, it was bought for the price of a cheap Picasso. The difference between the diamond world and the art world – in which we’ve seen people pay $300 million for a Gauguin and more than $250 million for a Cézanne – is that art collectors know that when they want to re-sell they will find a buyer. I believe that when people appreciate the benefits of investing in diamonds, the Blue Moon will re-sell for $200 million.

Diamonds are a treasure of nature, but more than this, they are rare, which makes them increasingly attractive to investors. According to the Fancy Color Research Foundation, prices for rare yellow, pink and blue diamonds rose 387 per cent between 2005 and 2017.

The Blue Moon of Josephine

Flawless Diamonds Are Rarer Than You Think

But even a one carat D Flawless diamond is a rarity of nature. Nature takes millions of years to create a diamond. The depths of the planet are like an impenetrable safe that stores rough diamonds. The minute probability of nature slowly producing a diamond over millions of years, which may or may not rise to the Earth’s surface, which may or may not be discovered, which may or may not have a perfect colour, which may or may not be free of inclusions, is so tiny that these combined factors should propel the value of such rare stones skyward.

Out of 127 million carats of rough diamonds, or 25,400 kilos, mined in 2015, only 1.8 million carats of diamonds, that’s 1.42 per cent or 125 kilos, were fit as a wealth preservation asset, defined as H or above in colour and VS or above in clarity.

Demand for diamonds is predicted to outpace supply in the coming years as many diamond mines reach the end of their lifespans and global mining companies have invested billions of pounds to discover new diamond sources with relatively little success.

The Unique Pink. Courtesy of Sotheby’s

It is an unfortunate and widely known truth that anyone buying a diamond at a jewellery store stands to lose a high proportion of the stone’s re-sale value the second they type in the fourth digit of their pin number. I believe the way consumers buy diamonds now needs to change.

Uncovering the Mysteries of Diamond Pricing

The pricing of diamonds is veiled in some mystery. Most people understand the 4Cs of diamond pricing – the colour, cut, clarity and carat weight of diamonds, which all determine a diamond’s price. But the fact remains, two diamonds categorised as like for like according to the 4Cs can exhibit a 20 per cent price differential caused by thousands of small nuances known to industry insiders as irregularities. An example is the position of an imperfection and its visibility when set into a ring.

For Savvy Consumers, The Mercury Diamond Price List by Ehud Laniado

For this reason, I advise savvy consumers to buy diamonds direct from reputable manufacturers which they can research online. In addition, I have harnessed my 40 years of expertise documenting diamond prices and my diamond pricing consultancy Mercury Diamond has begun publishing a comprehensive monthly diamond price list online, encompassing thousands of different categories of diamond alongside discounts and premiums based on 500 different irregularities, enabling anyone to buy and sell diamonds at the most accurate market price with confidence.

The Mercury Diamond Price list is regularly evaluated by a Big Four accounting firm and it is available for free download via my Instagram bio at @ehudaryelaniado.

The Future of Diamonds and Wealth Preservation

Knowledge is crucial and would-be investors should always consult a diamond expert, but I believe the day will come when diamonds are widely viewed as art is today – both for their breathtaking beauty and their wealth preservation potential.


 

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