Polished diamonds of the categories in Defined Value Diamond Discs (DVDs) have appreciated 5% on average per year, for the past decade. On the supply side, most rough diamonds come from Botswana, Canada and Russia. They are mined by various entities and partnerships between government and public companies. Since the dismantling of the DeBeers cartel in the late 1990s, and contrary to historic myth, there are no monopolies left, no reserves or stockpiles. Like other mined products, what is mined is sold shortly thereafter to pay operating expenses and earn some profit.
In the 21st century, diamond prices are purely a function of supply and demand. Overall, global wealth and demand is increasing while diamond exploration is dropping and existing mine output is decreasing.
Like all manufacturing, diamond polishing is an extremely competitive endeavor with small margins. The price of loose polished diamonds on the open market is determined by the supply and demand. Any large margins are earned at the retail end of the sale when diamonds are set into jewelry.
What this means to you is that the price you pay for Defined Value Diamonds (DVDs) reflects only the mine and manufacturing costs — without the huge markup you would pay at a retail jeweler.
Being able to buy the right diamonds at the PTP price is critically important from an investment perspective — especially when you choose to sell in the future.
Exploration budgets are declining and there are no new large mines on the horizon. It takes ten years for a major mine to begin production. Supply is now flat and will likely decrease while global wealth and demand continue to expand.
While prices may fluctuate in any given year, based on supply and demand, diamonds should achieve their average 5% growth — or better. Diamonds are unique. There are no comparable investments.
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