By Saul Singer
Investment diamonds once again outperformed the market in 2011 rising 20 percent. After rising almost 30 percent during the first seven months of the year, investment diamonds eased during the second half of the year on the back of global macro-economic jitters ending the year 20 percent up.
The rise in investment diamonds is even more impressive when put into the bleak context of the overall state of the financial markets during 2011. Global equities declined around seven percent whereas the overall commodities market fell 13 percent during 2011. Although there were some individual commodities that did post solid rises such as Brent crude up 17 percent and unleaded gas up 15 percent, investment diamonds still outperformed. Even gold increased only 10 percent in 2011.
The significant rise in diamond prices during 2011 was underpinned by considerable increase in demand led by China and the Far East while diamond production levels remained flat. This dynamic is set to continue into the medium-term and is set to support diamond prices going forward. At the very upper end of the diamond market, demand remains very strong supporting the record price levels being fetched on the international auction market for special and magnificent diamonds.
Diamond market fundamentals remain very robust with the upward price trend expected to continue through 2012 underpinned by demand outstripping supply. The major risk to rising diamond prices is further macro-economic turbulence in traditional diamond consuming markets such as the United States, however the strong demand from emerging diamond markets such as China is set to offset this risk. Our models point to continued price increase in investment diamonds with a projected rise of 10-15 percent in 2012.
Saul Singer is a partner at Fusion Alternatives Investment Management, an innovative investment house and the leading alternative investment asset manager specialising in investment diamonds. Fusion Alternatives does not hold any diamond inventory and aims to give expert and independent insight into the global diamond market. Courtesy:www.fusionalternatives.com.
