12 Feb 2020

How Much Could Pink Diamonds Go Up?

Regular readers of In the Loupe will be aware of the wealth generating potential pink diamonds offer, and why they are best seen as a long-term investment, with a five to ten-year investment time horizon at a minimum.

We are often asked what kind of returns investors can expect in this space. This will obviously be influenced by multiple factors, including the size of the investment a person makes, the timeframe they hold for, and the type of pink diamond or diamonds they end up investing in.

The following chart plots the value of a pink diamond portfolio both now and in 2030, based on a range of initial investments, and using a forecast annual return of 11.94%.

This return is in line with the average historical USD pink diamond price for the three main categories of pink diamonds we source for clients at Australian Diamond Portfolio.

We’ve used three initial investment figures, starting at AUD $25,000 through to $100,000. $50,000 represents a standard investment level for Australian Diamond Portfolio clients.

 

Potential Investment Growth over 10 years for Pink Diamonds

Potential Investment Growth over 10 years for Pink Diamonds

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02 Feb 2020

Interest Rate Cuts are Coming

The big news of the week in Australia was the decision by the Reserve Bank of Australia (RBA) to hold interest rates steady yesterday, with the cash rate still sitting at 0.75%.

Throughout January, there was some speculation that the RBA would cut rates this week, bringing them to a new all-time low of just 0.50%, with fears of the economic contagion caused by the coronavirus outbreak one of the factors supporting a rate cut.

Some commentators even suggested the RBA should “shock the market” and cut rates by 0.50% or even 0.75%, bringing interest rates all the way to zero, in a clear sign that the central bank would do all it could to push the value of our currency lower, in the hope it would stimulate the economy.

Thankfully, saner heads have prevailed for now (and we really must stress the “for now” part), with stronger than expected employment data in late January and a pick-up in house prices enough to see the RBA stay put.

Make no mistake though, interest rate cuts are coming in 2020, with expectations (seen below in this chart from the ASX), suggesting the market has now fully priced in a rate cut by May of this year, with the potential for further easing seen in the second half of 2020.

 

ASX 30 Day Interbank Cash Rate Futures Implied Yield Curve
As at market close on 3rd February 2020

ASX 30 Day Interbank Cash Rate Futures Implied Yield Curve

Source: ASX. ASX disclaimer: This document provides general information and is indicative only. It is not investment advice and readers should seek their own professional advice in assessing the effects of the information in their circumstances. ASX limited and its related corporations accept no responsibility for errors or omissions, including negligence , or for any damage loss or claim arising from reliance on the information. Futures and options trading involves he potential for both profits and losses and only licensed brokers and advisors can advise on the risk.

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31 Jan 2020

Markets volatile higher as Rio confirms Argyle closure

Happy New Year!

We trust you enjoyed the holiday period with family and friends, as well as some Australia Day celebrations, and we wish you a prosperous new year and decade ahead.

This week’s first In the Loupe for 2020 will look at three key themes, all of which are relevant for pink diamond investors, with demand for these investments set to strengthen in the years ahead.

We start with a warning sign for equity market investors, before looking at some of the signs of trouble that continue to build in the Australian economy.

This week’s report then looks at the latest news from the Argyle Diamond Mine itself, with news that production there is set to come to a halt in the last three months of 2020.

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27 Nov 2019

Diamond Demand Soaring as Central Banks Cut Rates

Last week we commented on the large increase in demand that we have seen at Australian Diamond Portfolio, with many clients either opening or adding to their pink diamond investment portfolio as 2019 comes to a close.

As we discussed, this has been driven by a number of tailwinds, including the pending closure of the Argyle Diamond Mine, which is on track to shut for good by the end of next year.

In this week’s “In the Loupe”, we wanted to share with you the latest news from the Argyle mine itself, which reinforces how strong the demand for pink diamonds is around the world today.

The headline below comes from a 20th November 2019 press release from Rio Tinto (the owner of the Argyle Diamond Mine), which discusses the results from this year’s 35th pink diamond tender.

Rio Tinto press release

The press release noted that the tender saw double digit growth in the number of bids for diamonds, relative to the demand seen last year.

Successful bidders came from nine different countries, further evidence of the intense global demand for these diamonds, with one successful bidder stating that, “no other diamonds on earth match the rarity and provenance of pink diamonds [from the Argyle mine].” 

We very much agree with and share that sentiment, as both of these features, rarity and provenance, are essential characteristics of any investment diamond we present to clients of Australian Diamond Portfolio.

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20 Nov 2019

Diamond Demand Rising as we head into Christmas

Over the last couple of months, there has been a notable uptick in demand from our clients at Australian Diamond Portfolio. Multiple tailwinds have driven this demand, including the release of the penultimate pink diamond tender in July this year, and our special report into the closure of the Argyle Diamond Mine, which looked at its likely impact on prices for pink diamonds in years to come.

Interest rate cuts by the RBA have also been an important driver, with investors realising there is no real way to preserve, let alone grow real wealth through traditional savings anymore.

By and large, clients are looking for pink diamonds with significant vibrance and rich, deep colouring, as those are the stones that offer the best performance potential in the years ahead.

Clients are also wisely (in our view) steering clear of colourless diamonds, and even other coloured diamonds like yellow diamonds, as these types of stones do not offer the unique supply/demand profile, nor the investment potential that pink diamonds can provide.

As our widely read Pink Diamond Investment Guide highlights, whilst; “In the colourless diamond world, buyers pursue ‘less’: less colour, fewer inclusions and little if no fluorescence, to the point where the ‘void’ symbolises perfection…….In sharp contrast, in the fancy colour diamond sphere, we pursue ‘more’: more colour, more saturation, brighter tone and more character.”

Huesaturation, and tone: Those are three of the key characteristics we look for when assessing which pink diamonds we should present to our clients as investment opportunities.

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14 Nov 2019

Diamond Market Stable as AUD and Equity Market Risks Build!

It’s been another solid quarter for rare coloured diamonds, with the Fancy Colour Research Foundation (FCRF) releasing their Q3 2019 diamond index data last week.

Overall, pink diamond prices were steady, with the highest performance seen amongst fancy vivid pinks, particularly 1 and 3 carats fancy vivid pinks, which rose by 1.6% and 1.7% respectively.

Whilst not enormous gains for one calendar quarter, these price increases do translate to gains of approximately 7% per annum in USD terms, a very solid return in the difficult investing environment we find ourselves in.

Pink diamond prices were also substantially more resilient than other parts of the diamond universe, with yellow diamonds falling by 1.5% for the quarter, with losses of approximately 5% over the last year.

This performance discrepancy is one of the key reasons why Australian Diamond Portfolio focuses its efforts on the pink diamond market.

Our decades of experience in the industry, and the pending closure of the Argyle Diamond Mine give us confidence that pink diamonds, and pink diamonds alone are the sector of the rare coloured diamond market that offers the best return potential for our clients in the next decade.

Pile of Australian Dollars

Under the proposed “Currency (Restrictions on Use of Cash) Bill 2019” businesses and individuals would be limited to $10,000 for cash transactions.

Cash Ban Coming?

One of the interesting developments taking place in Australia right now is the discussion around limiting the use of cash in day to day commerce. Under a proposed law, called the “Currency (Restrictions on Use of Cash) Bill 2019” which looks like it may well get the legislative go ahead, all cash transactions between businesses and individuals would be limited to $10,000, with a range of punishments for those who breach this limit.

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06 Nov 2019

Luxury Index shows strong diamond performance

Last week we shared an article that appeared in both The Financial Review and in Bloomberg, which looked at the pending closure of the Argyle Mine, and why it will likely kick-start another leg higher in the pink diamond market.

This week we wanted to share some findings from a recently published update from Knight Frank, whose regular Luxury Investment Index highlights the performance of a range of boutique assets favoured by High Net Worth investors the world over, from whiskey, to wine, to cars, coins, art, watches, stamps, furniture, and of course, coloured diamonds.

The recent Knight Frank update, which focused on the performance of coloured gemstones, noted the strong rise in these gemstones, which had outperformed the broader jewellery market.

The report also highlighted the strong performance of diamonds, and included the following chart, which shows the growth over 10 years in a range of luxury investment assets, including coloured diamonds.

Knight Frank Luxury Investment Index

Source: Compiled by Knight Frank Research using data from Art Market Research (art, coins, furniture, jewellery, stamps and watches), Fancy Coloured Research Foundation (coloured diamonds), HAGI (cars), Rare Whiskey 101 and Wine Owners. All data Q1 2019 except watches (Q2 2018) and coins, furniture, jewellery and stamps (Q4 2018, stamps provisional).

As you can see, coloured diamonds as a whole have had an excellent decade, more than doubling in value in the ten years to end Q1 2019, with total growth of 113%, or approximately 8% per annum.

Pink diamonds, which are our speciality at Australian Diamond Portfolio, have of course outperformed the broader coloured diamond market, with returns of over 12% per annum since 2005, a return that would make them the second highest performing asset on the chart above.

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19 May 2016

‘Oppenheimer Blue’ diamond smashes estimates, sells for world record A$80 million

A recent spate of eye-popping bids at Geneva’s semi-annual magnificent jewel auctions has highlighted the surging value of precious stones, with some of the world’s ultra-rich increasingly investing in hard assets as a safeguard against stock market volatility.

“When you buy a Picasso, you pay a lot, but you know you are going to sell it for even more.”

The dazzling 14.62 carat blue diamond etched a record $80 million at auction in Geneva, May 18, 2016.

The dazzling 14.62 carat blue diamond etched a record $80 million at auction in Geneva, May 18, 2016.

The “Oppenheimer Blue”, the largest and finest fancy vivid blue diamond ever offered at auction, sold for a world record 56.837 million Swiss francs ($80.71 million) on Wednesday after dramatic see-saw bidding, Christie’s said.

“It’s the most expensive jewel ever sold at auction,” said Christie’s spokeswoman Alexandra Kindermann.

The rare rectangular-cut stone, which weighs 14.62 carats, previously belonged to Sir Philip Oppenheimer, who controlled the Diamond Syndicate in London.

Before the auction experts ad said it was in with a chance of beating the record of $48.4 million set by Sotheby’s in November with Hong Kong billionaire Joseph Lau’s purchase of the 12.03-carat “Blue Moon of Josephine”.

The packed Geneva saleroom broke into applause as Rahul Kadakia, Christie’s International Head of Jewellery, brought down the hammer after two phone bidders ended a 20-minute battle for the gem.

The buyer’s identity was not immediately known.

Sotheby’s fetched a record price in the Fancy Vivid Pink Category on Tuesday, when a private buyer in Asia scooped up a 15.38-carat stone for $31.6 million.

Ehud Laniado, president of Cora International, which sold the stone dubbed “Unique Pink”, said he was “very happy with the sale price”, and voiced confidence that the gem’s value would rise over time.

“When you buy a Picasso, you pay a lot, but you know you are going to sell it for even more,” he said.

 

 

Surge in diamond prices amid volatile share market

A recent spate of eye-popping bids at Geneva’s semi-annual magnificent jewel auctions has highlighted the surging value of precious stones, with some of the world’s ultra-rich increasingly investing in hard assets as a safeguard against stock market volatility.

Britain’s Sir Philip Oppenheimer (1911-1995) led a powerful cartel called the Central Selling Organization for 45 years, tightly controlling roughly 80 percent of the international diamond trade in a bid to prevent wild price swings.

Among his major credits was convincing the Soviet Union to sell its significant diamond reserves through his London-based cartel.

De Beers, the giant mining company built by the Oppenheimer family, also flourished in the latter half of the 20th century, thanks in part to Sir Philip’s outsized influence in the sector.

The blue stone has passed through several hands since Oppenheimer’s death and this week marked its first appearance at public auction.

“As a general rule, these stones are quite small,” said Christie’s diamond expert Jean-Marc Lunel, noting that a Fancy Vivid Blue weighing just five carats typically generates considerable buzz in the diamond market.

Last week, Canadian mining company Lucara Diamond announced the sale of a huge 813-carat uncut diamond for a record $63 million ($66.8 million).

The name of the buyer for the gem, which was discovered in Botswana, was not divulged, nor the conditions of the sale overseen by Nemesis International.

That record sale figure for a rough diamond is unlikely to last very long.

Lucara is preparing to auction an even larger 1,109-carat diamond at Sotheby’s in London on June 29.

 

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06 Apr 2016

Coloured diamonds continue to outperform at auction

“People are aware that [pink diamonds] are an amazing investment…stones like this come to the market once every few years, and many wealthy people are looking for something unique — and that’s why the price is going up all the time.”

Coloured diamonds are a billionaire’s best friend is not quite as catchy a lyric as Marilyn Monroe’s husky rendition, but it is fast becoming the theme tune for the world’s auction houses.

Sotheby’s is set to auction the “Unique Pink”, a 15.38 carat “fancy vivid” pink diamond, in Geneva on May 17 with a sales estimate of US$28m-$38m.

The auction is the latest in a series of sales of coloured diamonds that have broken records around the world. In Hong Kong this week, the De Beers Millennium blue diamond fetched US$31.8m — the highest price recorded for a jewel at auction in Asia.

vivid-blue-de-beers-millennium-jewel-4-weighing-10-10-carats-1

Vivid Blue ‘De Beers Millennium Jewel 4’, weighing 10.10 carats

The Blue Moon of Josephine holds the record for any diamond or gemstone. Property magnate Joseph Lau reportedly paid US$48.5m at Sotheby’s in 2015 for the blue diamond, discovered in a South African mine in 2014, for his seven-year-old daughter, Josephine.

The Graff Pink is the most expensive pink diamond to have been sold at auction, fetching US$46m at Sotheby’s in Geneva in 2010. The auction record for a colourless diamond is US$31m.

graff-pink-24-78ct-diamond

Fancy Intense Pink, named the ‘Graff Pink’, weighing 24.78 carats

“Coloured diamonds have long been sought after,” said Francois Graff, chief executive officer of Graff Diamonds. “The market began to open up in the 1980s, and in the past five to 10 years that growth has accelerated as more people have become aware of their extreme rarity and appreciative of their unique beauty.”

Pink diamonds are the most sought after, with only one stone in every 10,000 mined displaying any form of colour. According to the Fancy Color Research Foundation, since the non-profit organisation started its price index in January 2005, pink diamonds have risen in value by more than 350 per cent. By comparison, gold has risen by just over 160 per cent and the S&P 500 by 66 per cent.

“People are aware that [pink diamonds] are an amazing investment,” said Eden Rachminov, a diamond specialist and author of The Fancy Color Diamond Book. “Stones like this come to the market once every few years, and many wealthy people are looking for something unique — and that’s why the price is going up all the time.

Blue and yellow diamonds have been equally successful at auction and as an investment. Over the 11-year period tracked by the FRCF they have risen in value 180 per cent and 54 per cent respectively.

“There’s a lake of cash around at the moment,” said David Bennett, worldwide chairman of Sotheby’s international jewellery division. “When someone sees a vivid pink or a vivid blue, they are generally in awe of it — and it becomes an object of desire.”

Source: Financial Times

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03 Nov 2015

Q3 2015 Demand for Blue Diamonds Strengthens

Demand for blue diamonds may have been magnified by the excitement being generated by the upcoming Sotheby’s auction headlined by the “Blue Moon“, one of the world’s important fancy Vivid blue diamonds. This has caused increased demand against a shortage of fancy blue diamonds.”

As the diamond industry gears up for its hot-selling holiday season, fancy colour diamond prices are holding steady. According to the Fancy Color Diamond Index, prices of these diamonds remained stable during the third quarter of 2015, at a time when white diamond prices showed declines of 6 – 10%. The best-performing fancy color diamonds were Vivid blue diamonds, which showed price increases of up to 6% over the previous quarter.

Between July to September 2015, the Fancy Color Diamond Index remained steady, despite lower transaction volumes. Yellow diamond prices, especially in the Fancy category, were soft and declined by up to 2%. Blue diamonds showed average price rises of up to 2%, driven by the Vivid category, with certain sizes (1.5 carat, 2 carats and 5 carat) increasing by 5 – 6% over the previous quarter. This marks the most significant quarterly price increase for blue diamonds in the last 12 months. Prices for pink diamonds remain steady as well.

On a year-on-year basis, when compared to Q3 2014, blue diamonds have been the strongest performer among all colour categories with a 3 – 4% price appreciation. The highest single-category year-on-year price increase was for 5 carat Vivid blue diamonds at 11%.

FCRF Advisory Board Chairman Eden Rachminov said, “Demand for blue diamonds may have been magnified by the excitement being generated by the upcoming Sotheby’s auction headlined by the “Blue Moon“, one of the world’s important fancy Vivid blue diamonds. This has caused increased demand against a shortage of fancy blue diamonds.”

 

Source: Fancy Color Diamond Index
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