Interested in the long-term value of natural diamonds? You’re not alone. While we champion natural diamonds for their beauty, rarity, symbolism and individuality, it’s these same characteristics that can make them a solid investment.
Despite price fluctuations, the scarcity and unrivalled brilliance of natural diamonds has kept investors and buyers interested for decades1.
Why are natural diamonds rare?
To understand their investment appeal, let’s talk about how natural diamonds are formed in the first place.
Their story begins about 4.5 billion years ago, with stardust forming pure crystallized carbon under immense heat and pressure deep within the Earth’s mantle. They were then brought to the surface by volcanic activity to eventually be discovered by humans, firstly in Ancient India.
It’s pretty mind-blowing to think that some natural diamonds are between 90 million and 3.5 billion years old, meaning they were formed before mankind even existed. But this is exactly what appeals to buyers and investors and sets natural diamonds apart from their synthetic counterparts, laboratory-grown diamonds (also called LGDs).
As natural diamonds can only be found in certain parts of the world (the biggest diamond mines are found in Botswana, Canada, Russia and South Africa, where volcanic sites have the right conditions for recovery), they’re exceptionally rare and precious.
The power of uniqueness in natural diamond investments
Much like snowflakes, leaves and us humans, no two natural diamonds are exactly the same. Every natural diamond has its own quirks and qualities that make it special and unique, which is likely why bidding frenzies for famous, super-rare diamonds can escalate quickly – that natural diamond you might have your eye on is genuinely one of a kind!
A good example of this is the CTF Pink Star (pictured below), which holds the record for the most expensive pink diamond ever sold at auction – it sold for 553 million HKD in April 2017, which is nearly $71 million today2. Pink diamonds are incredibly rare; it’s estimated that around 80% of them originate from the Argyle mine in Kimberley, Western Australia, but only around 0.1% of its total output is pink diamonds3.
Historically, rarer, more individual items tend to hold their value4 over, say, their mass-produced counterparts.
What past trends reveal about natural diamond investment potential
If you’re looking at natural diamonds from an investment perspective, let’s whizz through some of the numbers…
In recent history, natural diamonds have shown resilience during financial downturns and remained stable in price. A report released in 2011 by consultancy firm Bain & Company revealed that between 1982 and 2010 the price of a single polished diamond appreciated by an average of 2% annually5.
“Historically, demand has been driven by factors such as total private consumption and the size of the middle class in different countries. As the world economy has grown over the past century, so has the demand for polished diamonds,” says the report.
When the COVID-19 pandemic struck in 2020, it caused a temporary dip in diamond prices, among many other things6. Despite this, diamonds still outperformed other luxury items during the downturn7. The following year, prices recovered after many countries’ restrictions began to ease and the world slowly returned to normal.
The post-pandemic boom drove up the price of luxury goods, with diamond retailer De Beers reporting a 34% increase in natural diamond jewelry sales in the US in 20218.
Things to keep in mind when investing in natural diamonds
Whatever your reason for investing in diamond jewelry, it’s important to do your homework and be clear about your end goal.
If you’re hoping to sell a diamond piece for a profit, keep on top of market trends – they’ll give you an idea of what types of diamonds (carats, clarity grades and colors, for example) are currently most popular and the potential price you could achieve.
Rapaport provides deep financial insight into the diamond industry, reporting in real time on buying trends, prices and the impact of LGDs in the natural diamond market.
Sales assistants at jewelry stores can also be a great source of in-person intel, as they’ll likely know what kind of jewelry, cuts and styles are flying off the shelves.
Why the 4Cs matter when investing in natural diamonds
New to the 4Cs of diamonds? They stand for carat weight, color, clarity and cut. All four play a role in not just appearance, but also long-term diamond investment potential.
Graded on individual scales, the 4Cs are crucial in determining a diamond’s value as they collectively define a natural diamond’s quality, rarity and perceived beauty.
Cut affects how well a diamond reflects light, directly influencing its brilliance and sparkle. Color, in fact, measures the absence of color, with the most valuable diamonds being colorless due to their rarity in nature. Clarity assesses the presence of internal flaws (called inclusions) or external blemishes, with fewer imperfections increasing the diamond’s worth – again, because flawless natural diamonds are rarer. Carat weight indicates the diamond’s weight, with larger stones being limited and more expensive.
These four metrics provide a standardized way to assess and compare diamonds, ensuring transparency and consistency in pricing and quality evaluation.
Why certification matters when buying diamonds
If you’re buying a natural diamond as an investment, with the possibility of reselling it in the future, having all the right paperwork is imperative.
Polished diamonds larger than 0.3 carat in size come with their own individual report documenting their origin and grading for each of the 4Cs. These are issued by an independent gemological institute, such as the Gemological Institute of America (GIA), American Gem Society (AGS) and De Beers Institute of Diamonds.
To ensure there’s never any mix-up about which report refers to which diamond, most diamonds will have an inscription on either their girdle (the ‘waist’ of the diamond) or their table (the top facet) that corresponds with its report.
A grading report is essential when re-selling a diamond because it proves authenticity, something which every buyer will be on the lookout for.
Sources
- Hatton-garden-jewellers.co.uk, The value of diamond over time ↩︎
- Sothebys.com, The five most expensive pink diamonds ↩︎
- Sothebys.com, The five most expensive pink diamonds ↩︎
- Hutchinsonscott.co.uk, Factors that impact the value of antiques ↩︎
- Media.bain.com/Images/PR_BAIN_REPORT_The_global_diamond_industry.pdf ↩︎
- Debeersgroup.com/~/media/Files/D/De-Beers-Group-V2/documents/reports/2022/DeBeers_DIR2022.pdf ↩︎
- Bain.com, The global diamond industry 2020–21 ↩︎
- Debeersgroup.com/~/media/Files/D/De-Beers-Group-V2/documents/reports/2022/DeBeers_DIR2022.pdf ↩︎
