Diamonds are a Bad Investment – Oh REALLY?!?

50.01 RadiantFor the vast majority of people I believe diamonds are not an investment.  If you buy an engagement ring you should not expect the resale value to exceed your purchase price for a long, long time.  If you have excess cash, try stocks, bonds or gold.

Are there exceptions?  Apparently so, lets take a look at a diamond that sold at auction today at Christie’s New York.

The diamond sold was a rectangular-cut diamond, weighing 50.01 carats with a GIA report stating the color as D and the clarity as VVS2 along with a work diagram indicating that the clarity may be internally flawless if recut.

The selling price was $8,370,500 (or about $167,000 per carat).  An expensive stone, no doubt.  But this is not the first time this diamond has been sold.

Back on April 12, 2005 the same diamond was sold at auction (also by Christies’s New York) for $4,216,000 ($84,000 per carat).  Back then it had a GIA report stating the diamond had flawless clarity, so someone must have been wearing it or using it and the diamond suffered a bit of damage since the sale in 2005.  Even with the damage the diamond increased in value by 99%, try finding another investment from 2005 through today with that type of return.

The GIA report number in 2005 was the same report number as the GIA issued again in 2012, so we know the diamond was submitted for a report update and not sent in for a new report.   Had it been sent in for a fresh report, the diamond would have obtained a new report number.

But wait, there is more to this story.  This diamond gets around.  This diamond was also sold on November 17, 1994 in Geneva for $2,545,000.    The value did not increase at such a quick rate as in the last decade but still from 1994 through 2005 the incredible diamond increased 66%.

Had you bought the diamond in 1994 and held it through 2012 you would be up 229%.

So who buys these diamonds?  Often if it is a private buyer they often remain anonymous, but for each of these sales the buyer was Laurence Graff of Graff Diamonds.

8.88 ct D FL x 2 = 17.76ctw

Christies auctioned off a PAIR of 8.88ct D color, flawless clarity diamonds today.  They have the highest cut grade, symmetry & polish; all excellent – known as EX/EX/EX.

Both stones have GIA reports (and have their GIA report numbers inscribed), we obtained copies of both reports from the GIA grab a copy and drool 2135439789 & 5131447612.

Final auction price for the pair of incredible diamonds was $3,716,302 USD or $209,251 per carat.  Both diamonds are Type IIa, which often result in the most chemically pure diamond and why so many IF stones are Type IIa.

76.02 Diamond – Archduke Joseph

Christie’s sells 76.02ct D IF Archduke Joseph for 22 million, or $280K/ct.  The diamond is a rare Type IIa diamond.  The buyer remains anonymous (I can help narrow down the search, the buyer is not me).

The Archduke diamond is believed to have come from India’s Golcanda mine, the home of many Type IIa diamonds.

The diamond was previously owned (and named after) Archduke Joseph August (1872–1962), a Hungarian prince of the Habsburg dynasty. Last sold at auction in 1993 the diamond at the time was ‘only’ $6.5 million. It was subsequently recut to improve its clarity and brilliance.  Back in the 1800’s they just did not have the cutting technology available to bring out the diamond’s full potential.

The GIA report for this diamond is number 5151001770 and was issued on September 14, 2012.  For some reason using the GIA report check the report is at this time not available.

 

 

Diamond Prices Continue To Drop

I posted a comment a few months back about diamond prices dropping, based on the official RAP price list.  We are seeing that prices are continuing to drop, which is bad news for diamond sellers.  The amounts of the drop that we are seeing is not massive like you might see on the stock market but a few % drop here and there do add up in the diamond trade.

A diamond that a few weeks ago may have traded for $5,000 might now be $4,700 today.  In times like this a lot of dealers just keep their inventory close to them, refusing to sell due to the loss they will incur if they do sell.  You see this type of thing int he stock market also, where sellers who own a stock fall in love with it and never sell – as they ride the price drops all the way to the bottom.

Synthetic Diamonds Enter Market

Synthetic (man made/fake) diamonds produced by CVD (Chemical Vapor Deposition) have been around for a while.  There are companies making them and selling the finished diamonds on the market but the demand for them is quite small.

When our diamond buyers are making a purchase there are a number of diamond type(s) that we do not purchase.  Among the items we do not purchase are treated diamonds.  Synthetic diamonds are also something we would have no interest in purchasing.

All synthetic diamonds must legally be sold with full disclosure, stating that they are not natural.  However, when there is money to be made the crooks come out of the woodwork.

A batch of hundreds of CVD diamonds recently showed up at the IGI (International Gemological Institute) in both Antwerp and Mumbai for certification as natural diamond.  The IGI caught that the diamonds were not natural, however it is raising concern that a larger volume of these fake diamonds may have already entered the market.

A polished diamond dealer who sent the diamonds for certification claimed he bought the diamonds as natural from another dealer.

The IGI issued an alert which has been sent to dealers and diamond labs worldwide in attempt to keep the industry informed.

Debeers has also alerted their customers (sightholders) that it is aware of three recent instances of undisclosed CVD diamonds being sent to grading labs as well.  Debeers (Diamond Trading Company) has also issued a statement.

Synthetic diamonds entering the market without disclosure is certainly bad for the industry as a whole.

Chemical Melt

If you deal with old jewelry, you know all too well about prying small stones from jewelry.  When getting a batch of old gold or platinum ready for refining it is best to remove the old stones.

Often the result is broken or damaged stones.  Not only does the process take a LONG time to sit there and file out old stones any damage damage hurts the recovered stone value.

We recently sent a batch of old rings to a refiner who does a chemical melt, the metal is put into a beaker and is broken down.  The stones fall to the bottom of the beaker, without damage.

We tried it with a service located outside the USA, but we have found one such company located in St. Paul, MN.

No actual experience with this company, but certainly take a look at Stebgo Metals if the idea of no longer doing removal of stones by hand is appealing to you.

A Diamond In Need Of Help – Part 2

Back in February I did a posting on a diamond that had a fair cut grade, it was not a very attractive diamond.  Of course we sent it off to the diamond cutter to bring it to life.  Our estimate was the diamond would need to come down to 1.17ct in order to greatly improve its looks, at least that was our estimate based on our diamond recut chart.

The diamond cutter did what he needed to do and once done it was back to the GIA to see what they thought of it.  Great news for us the stone’s finished weight only dropped down to 1.34ct.  The good news continues as cut grade jumped up three cut grades to excellent.  As a bonus some inclusions were removed from the diamond during the recutting and the GIA increased the clarity grade from VS2 to VS1.

The diamond now is very brilliant and a great piece of art, certainly this stone will grace the finger of a truly beautiful girl at some point.

We will do another recutting ride along shortly.  We had in our inventory a very ugly 3.13ct cushion cut diamond, we did a posting about clarity enhancing using the stone.  After enhancement it was still ugly, so we sent it off to the cutter as well and are expecting it back shortly.   I suspect the transformation of that stone will be even more dramatic than this one.

Can taxes in India affect US jewelry prices?

When India passed their 2012 budget, it came with some tax increases as well as new taxes for members of the trade.

Existing import duty on gold bars, coins and platinum increased from two percent to four percent which is a 100% increase in the tax rate on these items.

A new tax was added of one percent on non-branded jewelry.

These materials used to make jewelry obviously cause the finished product to cost more, not good for the end consumer.

Like many countries in the world right now, the Indian government believes taxing citizens and companies allow them to increase their revenue.

Do the gold & gem workers sit down and take it?  Nope, thousands of staff have gone on strike demanding the government roll back the taxes.  Some have even gone as far as initiating hunger strikes.

If those taxes are not enough, Suart diamantaries (the largest diamond polishing center in the world by volume) are now being charged a professional tax from diamond manufactures and workers.

Things are clearly getting bad in India for the diamond and gem industry.  The government wants a larger share of the pie.

The final product – a 7.30ct diamond

After weeks of work the diamond cutter has completed cutting the 23.86ct diamond.  The final weight of the diamond ended up being 7.30ct.  There was an option at one point to make it an 8.xx carat diamond but the clarity would have been lower so it was decided to reduce the weight in an attempt to bump up the clarity.

Here is the final shot leading up to the finished 7.30ct diamond, you can see in this photo the star facets are not yet complete but everything else is done… getting very close.

Looking great!  The diamond is now complete, shown here with it’s baby sister.  In most cases a rough diamond will finish out into one large diamond and one or more smaller diamonds.  The remaining rough will be polished into a sister diamond at a later time, for now she looks great with the big brother!