Are diamonds a good investment compared to gold?
Both diamonds and gold are luxuries that have been symbols of status and wealth in many cultures for thousands of years. While gold and diamonds have both been considered good assets, which one is the better investment?
Diamonds as an investment
The beauty of the diamond is something that has captured the hearts and minds of people since time immemorial and there is no question that the stones’ aesthetic value (clarity, cut, colour, etc.) is primarily responsible for the diamonds worth. However, when it comes to investing in diamonds, it is essential to bear in mind that the majority of these precious stones may not always be worth your financial investment.
The rise of diamonds’ worth in the 20th century stems from the De Beer’s advertising campaign, encouraging men and women to believe that a diamond ring was a symbol of love and commitment. The fact that De Beers had a monopoly on the diamond trading market until the 21st century also allowed them to control supply, having a large impact on its value.
When it comes to diamond investing the four things that an investor should have a good understanding of are: price transparency, quality assurance, transaction fees and liquidity (how quickly the stone can be bought or sold in markets).
Gold as an investment
Gold is a precious metal that has been regarded to be a safe haven asset. It has been used as a form of currency throughout most of humanity’s recorded history and like most assets; its wealth is subject to supply and demand which fluctuates over time.
Although portrayed as a reliable investment (because over time it retains and generally increases in value), gold has been considered by some to be a poor investment, primarily because of the fact that it is an asset which does not have any earnings. Like diamonds, you usually buy gold jewellery with a large retail mark so it is best to acquire it in its raw form.
– Gold has shown to be a safe haven in the past against economic downturns.
– Common diamonds have poor resale value, however, an iconic stone that has great historical value can have a great rise in value, for example royalty stones.
– Most diamonds acquired through jewelers lose at least half of their value upon purchase due to the large retail mark-up that is added in stores. This makes diamonds resale value very poor in comparison to what was spent on purchasing it. However, some rare and iconic stones can offer an investor a terrific financial opportunity if one has the capital to acquire them, as well as the means to sell.
In comparison to diamonds, it appears that gold is the safer avenue for investment. When it comes to buying diamonds vs. gold, the uncertainty of the diamond market means that it has the potential to go either way due to the asset’s worth being susceptible to fashion trends. Gold, however, has stood the test of time.