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Reports Are Out- Best Investment of 2017: Fancy Color

February 20, 2017

Last year was a phenomenal year for Fancy Color Diamonds. Sotheby’s realized records for six different fancy color diamonds including a fancy light blue diamond that fetched $2 million to and a fancy vivid pink went for $31 million. Not to be outdone, Christie’s sold the 14.6-carat Oppenheimer Blue diamond for a world record $57.5 million. The previous record was for a 12 carat fancy vivid blue diamond named Blue Moon of Josephine. It sold for $48 million.

 

 The Oppenheimer Blue Diamond

 

Over the last 20 years, fancy color diamonds have gone from $100,000 to $400,000 per carat at auction according to the international head of Christie’s Jewelry Department. During that same period of time colorless diamonds have appreciated but not as much as fancy color diamonds because of a larger supply of colorless diamonds compared to fancy color diamonds. In contrast to the record-setting prices for fancy color diamonds, a rough white diamond the size of a tennis ball, named Lesedi la Rona, failed to sell at auction. It was believed that the 1,109 carat diamond would sell for more than $70 million.

 

A more short-term view of investment grade diamonds presents an equally colorful picture. From January of 2009 to the end of September 2016, the price of pink diamonds has increased over 170%. Pink diamonds were not the only color to show an increase. Yellow and blue diamonds were up about 90% and 70%.

 

The Oppenheimer Blue diamond was not the only fancy color diamond for a hefty sum in 2016. A 7.32 carat internally flawless pear-shaped Fancy Vivid Blue diamond sold for over $17 million and a 6.64 fancy intense blue diamond sold for more than $13.5 million.

 

A 12.45 carat fancy purplish pink diamond sold for $4.5 million and at the same auction a 10.07 carat fancy intense purple-pink diamond sold for $8,845,000.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Even fancy color yellow diamonds, which are more common than many other fancy color diamonds had a great year. A 54.62 carat vivid yellow diamond in an 18K gold setting went for almost $2.5 million.

 

Why Diamonds, Why Now?

So why are investment grade diamonds such an attractive asset for 2017? The current investment marketplace has government bonds offering returns below zero in some instances, pushing investors towards different types of investments. As a result, vintage car prices are up over 450%, classic wine prices 240%, and fancy color diamonds 122% over the past decade. Eden Rachminov, managing partner of Rachminov Diamonds, believe there has definitely been a growth in the number of investors purchasing investment grade diamonds. Rachminov attributes the influx of investors to the higher prices increasing the attraction to fancy color diamonds.

Demand is only one side of the economics equation with supply being the other.  Just one out of every 10,000 diamonds (.0001%) is considered a fancy color diamonds. Larger than life fancy color diamonds are so rare that an investor can stand in the middle of the diamond district in Manhattan and ask for a colorless 5 carat D color, flawless diamond, and fifty suitors will show up. Ask for a 5 carat, vivid pink flawless and you can expect to wait about two weeks to find one. Some fancy colors are rarer than others. Red diamonds are extremely rare. In fact, only a handful are known to exist. The most respected diamond grading agency in the world, the Gemological Institute of America did not see a single red diamond for thirty years (1957-1987).

Fancy color diamonds are in such high demand that even brown diamonds, once relegated as a bottom feeder sell for a few thousand dollars a carat. The global investment grade diamond marketplace is almost $80 billion, up from just over $50 billion at the beginning of the century. The increase in the market is because investors understand that diamonds are a superior form of wealth concentration. Other reasons to invest in diamonds is they offer a hedge against economic and political instability, are a discrete way to transfer wealth and create wealth.

 

Characteristics of Investment Grade Diamonds

There are a few characteristics of the fancy color diamond market that make it unique. No two diamonds are exactly alike so it is difficult to determine an exact value of an investment grade diamond. To further complicate the issue, the vast majority of investments in fancy color diamonds are largely from private sales. In fact, only 10%-15% of investment grade diamonds are sold at auction.

 

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