When it comes to safe haven assets, there are two that immediately jump to mind: precious metals, in particular gold, and diamonds. If gold has a thousand-year history behind it, which makes it by far the best known and easiest to buy, diamonds have risen to prominence in recent years as a safe haven offered by banking institutions. How to make an informed choice?
The history of the diamond as a safe haven asset: not just real value
The diamond is a rare stone and, in the purest specimens, of incredible hardness and brilliance. So it is assumed that it is also extremely expensive for this. But its history is not as old as that of the most precious metals and neither is it as linear: their success is due to De Beers and dates back only to the last century.
De Beers is a group of South African companies engaged in diamond mining. It was born from the idea of a merchant of water pumps destined for miners, who made his fortune and decided to grab the mining concessions of small owners, until he transformed De Beers, at the beginning of the 20th century, into the largest and only company in the mining industry.
Between ups and downs of production and demand, De Beers increased its power, until its moment of greatest splendor when it held 90% of the market. By putting diamonds into circulation or storing according to market fluctuations, he managed over the years to keep their price at exorbitant levels.
There are those who attribute much of the diamond’s success to marketing. From advertising campaigns to slogans, everything brought the price of stones to unprecedented levels: a stupendous piece of coal, transformed into crystal by the enormous earth pressure, certainly rare (but not so much), but with little practical application, has thus become the most expensive stone ever and with a completely independent market today.
Diamonds vs Gold: 8 good reasons to prefer gold
Let’s start from a fundamental premise: diversification is essential. In any investment portfolio, it is good to maintain a safe-haven percentage between 5 and 15%. Among safe-haven assets, it is advisable to choose a larger share of assets that are easy to disinvest and have a constant yield.
If diamonds have maintained an average yield of 4% in recent decades, why do we consider gold to be more reliable and easy to manage, especially for small savers? Here are 8 great reasons.
- There is no official international quotation. There is an international list of diamonds, the Rapport Diamond Report , which establishes the value of the various types of stones and which can be considered at most a good starting point to understand the real value of a diamond, although each stone is a story of its own.
- The lack of an official international quotation puts us in a position to entrust ourselves completely to the intermediary or to trust the seller .
- Diamonds cannot be liquidated in real time . Lacking a quotation, their sale is complex and generally one is forced to lose on average, in negotiation, 20% of the real value of the diamond. This is why it is good to avoid bargaining with subjects who have an interest in speculating on resale by lowering the purchase price , primarily banks.
- There is an objective risk of running into synthetic diamonds, at the center of the scandal and scams of recent years. Synthetic diamonds today are produced in a way that even an expert may not tell them apart from real diamonds, which makes them particularly insidious.
- The perfect carat weight for an investment diamond is between 0.5 and 2 carats . In fact, a smaller diamond does not need to be certified and is therefore a very high risk product, a diamond greater than 2 carats is extremely expensive and not always accessible and easy to keep.
- On diamonds, VAT is applied, which is not the case with investment gold, and its price depends on the dollar.
- Investing in diamonds is a long-term investment. It is estimated that it is possible to obtain a decent profit from reselling diamonds only after 10 years, a good profit after at least 25 years.
- To invest in diamonds it is necessary to have a good starting capital. If you intend to use diamonds as diversifiers, you need to take into account the very high prices of each stone. Investing in gold allows you to make small purchases, even repeated over time, to set aside a small treasure.
So we eliminate diamonds from the investment portfolio? It is not necessary. But it is essential to have a clear picture of the situation, to rely on the right people, to find out personally about the values and dynamics and to know how to wait several years.
With sell gold everything is much simpler. The recovery in prices in recent months, the growth trend of recent decades, make it a worthy opponent in terms of numbers, but it remains undefeated for safety and transparency in the sector.