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New RJC standard for lab-grown materials

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Minjar Gold Pty Ltd seeks proposal to acquire 100% ownership of Golden Dragon Gold Project

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Risk of diamond investments

28 march 2014

Contrary to what many websites and articles are saying about secure long-term investments in diamonds, non-professionals should use caution in this segment of the investment market.

Potential customers, who are ready to invest available funds in the purchase of diamonds, are now being attracted by companies and specialized websites, the number of which is increasing every day. To mention just a few, here are some of them: Diampatrimoine, I-diamants, Kara-diamonds, Adamia and Investdiamond.

The process is already widely running, just as it was the case with gold in recent years. Today, diamonds are sold even by Aucoffre.com specializing in the sale of yellow metal. This happened after gold has lost 30% of its value during the last year.

In support of prospects offered by diamonds deemed to be a reliable investment instrument they refer to different types of studies, first of all citing the results of the well-substantiated work done by Bain & Company, an authoritative American consultancy, in 2013.

The study titled “The Global Diamond Industry” testifies in behalf of attractiveness beamed by diamond investments. Being a scarce natural resource, diamonds usually go up in price and demand for them in the near future is hardly to subside. Thus, it is logical to expect that diamonds will only continue to grow in value.

However, this seemingly indisputable conclusion makes some experts aged 50 years and more give a skeptical smile: the speculative bubble that burst in 1985 after being inflated in the course of two years was the consequence of similar statements about investment attractiveness of diamonds.

Can this scenario be repeated? It is not excluded that it can. In fact, even if the statements of Bain & Company are well corroborated by documents, they have only distant relation to investments offered by individuals. Today, as it was in the 1980s, the diamond market is extremely complex and less transparent than the gold market. There are no official price quotes for diamonds and we have only indices released by Polished Prices or Rapaport Index...

Unlike gold bullions, all stones are different, and only an expert is able to estimate their value, which can range from tens to millions of euros. Auction sales of rare diamonds at record prices, as for example was the case with Christie’s in London in September 2013, do not reflect the general trend.

Despite the claims by Aucoffre.som that the diamond market is resilient to currency fluctuations, it cannot be stable any more, according to analysts from Quechoisir.org, a French financial portal. They recall that one-carat diamonds jumped in price from $100 to $175 during 2009-2011.

In this case, the year of 2009 is taken as reference, because it was very unfavorable for the diamond business. It was the time when Antwerp, which trades up to 80% of the world’s diamond output, saw its exports plunge by 70% compared with the level of 2008. Prices got very low, triggering necessity to find ways to make them grow.

In general, according to expert forecasts, demand for diamonds will continue to increase in the coming years. It is expected that it will go up twofold compared to supply by 2020 due to the expanding middle class in China and India.

Annual growth in demand for diamonds is now 6.4% and it is expected to reach 247 million carats by 2020. For comparison, polished production was 133 million carats in 2010.

Alex Shishlo, Editor in Chief of the European Bureau, Rough&Polished