ONE FOR THE RECORD BOOKS: DIAMONDS AT AUCTION IN 2014

Market Trend for Colored Diamonds For 2015 Looks Bright

Truly an exciting year for the diamond trade. An impressive number of new records were set with each major jewelry auction this year, making 2014 one for the record books.

Increasingly, jewelry – particularly diamonds – continues to grow in favor for the world’s wealthiest. “The 2012 Barclays Wealth Insight survey of 2,000 high-net-worth individuals revealed 70% of the respondents owning precious jewelry as part of their investments, as compared with 57% five years previously,” as reported last month by the Wall Street Journal. The most sought after jewels are, of course, colored diamonds, jewelry with distinguished provenance, and signed pieces by the world’s most established jewelry houses. To better understand the current state of the jewelry auction market, I spoke with Tom Burstein, Senior Vice President of the Jewelry Department at Christie’s New York, for his thoughts on this year’s spectacular auction results.]

The Ocean Dream Diamond – Photo courtesy of Christie’s

At the top of the list of most coveted jewels, colored diamonds reigned supreme in 2014. Realizing the highest prices were the colored diamonds at the very top of their class, flawless clarity and pure Fancy Vivid color grading. Colors that fell in between fared well with a few outliers that outperformed the rest, the most prominent being the Ocean Dream diamond – a 5.50-carat Fancy Vivid Blue-Green diamond that sold for $8,633,798, or $1,569,781 a carat. For Burstein, the diamond was “this deep ocean aqua blue that was just an extraordinary color and ultimately unique for a diamond graded Fancy Vivid Blue-Green.” Burstein also pointed out that despite its rarity of color, the oddly-shaped diamond of just over 5 carats sold within its estimate.

The world’s largest flawless fancy vivid pear shape blue diamond

Thanks to extremely limited supply of top quality specimens, blue diamonds came out on top at auction as two exceptional examples of the rare colored diamond, the Zoe Diamond and the Winston Blue, sold for extraordinary, record prices. In May at Christie’s Geneva, the Winston Blue – a 13.22-carat Flawless Fancy Vivid Blue diamond – sold for $23.7 million, setting a world auction record for price per carat for a blue diamond at $1,799,953 per carat.

The blue diamond, which has been named “blue perfection” is the biggest diamond of its kind ever to appear at auction in Geneva.

Rahul Kadakia, Head of Jewelry for Christie’s Americas & Switzerland, said:

"To have a stone that weighs 13 carats is near impossible."The stone is internally and externally bereft of any imperfections... in simple terms; it's the best blue diamond in the world."

Natural fancy colored diamonds are very rare and expensive; they are so rare that blue diamonds make up less than 2% of the world’s diamond production.

That record would hold for less than seven months as Mrs. Paul Mellon’s stunning 9.75-carat Fancy Vivid Blue diamond, renamed the Zoe Diamond by its new owner, sold for a staggering $32,645,000, or $3,348,205 per carat, at Sotheby’s in November.

The most expensive jewel to sell in 2014, the Zoe diamond also set a new world auction record for any blue diamond and a new world auction record for price-per-carat for any diamond.

The 8.41-carat Internally Flawless Fancy Vivid Purple-Pink Diamond. Photo courtesy of Sotheby’s

At Sotheby’s Hong Kong Magnificent Jewels sale in October, an 8.41-carat Fancy Vivid Pink diamond sold for nearly $17.8 million, setting a new world auction record for a Fancy Vivid pink.

While a few fine fancy pink diamonds sold at auction this year, it is important to remember just how rare a Fancy Vivid pink truly is. “Only 0.1% of the twenty million carats of rough produced annually is pink, and a whole year’s worth of production of these pink treasures over half a carat would fit in the palm of your hand. The majority of the produce qualified as ‘pink’ are usually around twenty points and of low clarity,” according to Sotheby’s.

The record-breaking prices for colored diamonds are most likely to continue in 2015 thanks to ever-increasing demand for the rarest of earth’s precious materials.

Even in November of last year, the New York Times investigated the rising popularity of colored diamonds as an investment. “Colored diamonds are continuing to climb in value as the market realizes that the supply is dwindling. The Rio Tinto’s Argyle mine, which produces more than 90 percent of the world’s natural pink diamonds, is expected to be closed in 2020.” Over the past ten years, the price per carat for fancy color diamonds has increased significantly. For example, pink diamond prices have increased by as much as 443%, according to a study by Leibish & Co conducted in 2012. For investors, color diamonds have not lost their sparkle and remain bright spots for investors looking to hedge against volatile equity markets.

A 75.97-carat pear-shaped diamond. Photo courtesy of NY Daily News

Colorless diamonds, meanwhile, also pulled in multi-million dollar prices, though no new major records were set this year. Most notably, two colorless diamonds sold for more than $14 million in May: a 70.33-carat cushion brilliant-cut D Flawless Type IIa diamond at Sotheby’s Geneva fetched $14.2 million and a 75.97-carat pear-shaped D Flawless diamond sold a day later at Christie’s Geneva for nearly $14.5 million. Overall, colorless diamonds comprised more than a third of all the Top Ten lots sold at this year’s magnificent jewels sales, a total of forty stones selling for a combined sum of $164.9 million.

Increasingly, consumers are valuing size above all else in the colorless diamond market. “And size counts when it comes to building value. From 1990 to 2011, the value of three-carat diamonds increased by 145 per cent, while five-carat diamonds rose by 171 per cent on the Rapaport Diamond Trade Index,” according to an article published earlier this year in The Week. However, there does appear to be a softening of the market for colorless diamonds of five to six carats and under, noted Burstein.

With more attention being drawn from outside the jewelry industry, the additional new bidders will increase demand for the ostensibly dwindling supply of extraordinary colored and colorless diamonds, which will ultimately push prices even higher in 2015. The year’s record-breaking sums for these incredibly rare stones have added to their allure as safe, profitable investments for wealthy individuals seeking tangible assets outside the traditional global markets that remain as shaky as a year ago.