Archives: Market Commentary

We are almost into the final two months of 2023, with market volatility picking up again, geopolitical conflict a front-page news item again, and the twin challenges of higher inflation and higher interest rates continuing to spark investors to ask the most important question of all…

What should I do with my portfolio?

Given the broader economic and financial market backdrop, combined with the unique supply and demand fundamentals underpinning the pink diamond market, we believe that this niche asset class remains a go-to solution for at least a portion of any portfolio.

This week, we are delighted to share some news from the pink diamond industry itself which highlights the enduring legacy of these assets, and why their investment potential remains undiminished.

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It has been another eventful week for investors, with 2023 looking like it will end with renewed volatility in a range of asset classes.

This volatility, and the need to both protect against it, as well as the need to find fresh avenues to generate growth in a portfolio, have been some of the key drivers of pink diamond demand over the last few years.

The volatility in asset classes is best seen in global share markets, which are again beginning to sell-off, after a stronger than expected start to the year.

In the United States, the S&P 500 is down 6% in the last month, while the ASX 200 in Australia is down by a similar amount, and now back below 7,000 points, a level it first reached back around 2007.

Oil prices have also moved sharply higher, last trading near $90 per barrel, which is one of the key reasons that inflation is not falling as fast as we’d all like, with recent data suggesting prices in Australia were rising by 5.2% per annum in the year to end August.

Meanwhile interest rates also remain at problematic levels for most households, with the likelihood that this will get worse before it gets better. This was made clear last week by the Reserve Bank of Australia.

Despite keeping interest rates steady at 4.10% at their meeting last Tuesday, they warned of the likelihood that they may raise rates further before the year is out, specifically noting that, “Some further tightening of monetary policy may be required to ensure that inflation returns to target in a reasonable timeframe.” 

We delve into the challenges investors and households are facing, and their likely impact on the pink diamond market, below.

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It’s hard to believe, but 2023 is almost three quarters over, with the calendar fast approaching the end of September.

The year has been characterised by several trends that have impacted Australian investors, including persistently high inflation, a falling Australian dollar, higher interest rates and low consumer confidence.

Despite these challenges, property markets, and the ASX 200 have held up relatively well, leading some investors to become far too complacent. There are signs now that weakness is beginning to return to these markets, with property listings surging due to mortgage stress, while the share market looks like it has peaked.

These factors have led to what is effectively a two-tiered outlook for pink diamonds. In the short-term, greater uncertainty, combined with reduced liquidity and reduced free cash flow amongst households means that there has been significantly less turnover in the pink diamond market.

Over the long-term, these factors support a continued bullish long-term outlook for alternative hard assets like pink diamonds, which should eventually benefit from demand as investors seek diversification, risk-protection, inflation hedging and outright sources of profit in their portfolios.

In this week’s article though, we focus on the primary source of pink diamonds over the past few decades, the now shuttered Argyle Diamond Mine.

Specifically, we look at a newly released study on the formation of this world famous diamond deposit that not only highlights how unique it truly was, but even more importantly, why the supply of these unique assets is set to remain so scarce going forward.

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We have an action-packed market update this week, with recent news articles helping to clarify a key message about the different segments of the diamond market that has been at the heart of Australian Diamond Portfolio’s engagement with clients over the years.

We also celebrate an important milestone and anniversary for Australian Diamond Portfolio, which would not have been possible without our wonderful client base.

We explore all this in detail below.

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Defensive investing might sound like a strange concept to talk about in the context of owning pink diamonds.

After all, for many people, pink diamonds are primarily seen or thought of as a luxury good, and one that is only accessible by the small portion of the population who are ultra-rich, and can afford to buy multi-million dollar pink diamonds, alongside expensive jewellery, custom-made high performance sports cars, rare art and waterfront property.

The media is partly responsible for fuelling this stereotype, with the most popular pink diamond stories typically being whenever a new record is set at auction for an ultra-expensive pink diamond that is sold for a price in the tens of millions of dollars. There are countless examples of such stories, including this one from late March 2023 which highlighted a Sotheby’s auction that featured a 10-carat pink diamond expected to fetch a $35m price tag.

While it is true that ultra-high net worth people do own pink diamonds, and that those multi-million-dollar price tags do exist, it is only a small component of the pink diamond market.

The vast majority of these truly beautiful assets are owned by everyday investors, who are buying pink diamonds as part of their investment portfolio. This includes the majority of clients that we have served at Australian Diamond Portfolio since opening back in 2013.

For this segment of the market, defensive investing and pink diamonds go hand in hand, as one of the key reasons to buy pink diamonds is their ability to both build and protect wealth in uncertain times.

Below, we explain just how relevant this will be for Australian investors going forward.

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Like most of Australia, we’ve well and truly found ourselves wrapped up in Matildas fever this week, joining the rest of the country in cheering on the women in green and gold.

With so much attention on the Women’s World Cup, it would be easy enough to forget that financial markets, and the investment world continue to function, with risks and opportunities continuing to present themselves.

In this week’s market update, we look at a major risk factor and warning sign from a famous investor, which suggests that now is the time to be cautious when it comes to traditional assets.

We also look at another research piece which highlights why commodities are potentially set for a period of strong performance.

Risk in traditional assets. Commodity market outperformance. This is the perfect environment for pink diamonds to thrive, as we will highlight below.

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In any given month, there are literally thousands of economic data points released to the market. From retail sales, to consumer confidence, to inflation to gross domestic product, never a day goes by where there isn’t a news release which investors attempt to use to discern what’s happening in the economy, and how they can best position their portfolio to profit moving forward.

The problem is, that with so many data points it’s hard to know which ones to ignore, and which ones to pay attention to. Signals (the information that you want to focus on) are few and far between, while noise (information that you would be better to ignore) is everywhere.

In this week’s market update, we look at one key economic data point that is about as strong as it has ever been. This data point is definitely a signal, though, paradoxical as it may seem, the very strength of this data all but confirms that for most investors, the road ahead is going to be very difficult to navigate, with caution the order of the day.

This environment that we are heading toward will also create opportunities for investors who capitalise on such a period, focusing on assets that typically outperform when mainstream markets tend to struggle.

Pink diamonds are one such asset, as we will explain below.

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In our update below, we look at yet more evidence that investors have, as a whole, gotten far too exuberant when it comes to the outlook for mainstream asset classes, especially given the risks that continue to build in the economy and in financial markets.

Paradoxically, the more that risk builds, the greater the opportunity for investors smart enough to avoid the crowd, and better position their wealth by holding less mainstream, but highly profitable investments.

This of course can include pink diamonds, as we explain below.

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The new financial year is off to an interesting start for investors, with central banks hitting pause (for now) on interest rate hikes, in Australia at least, while there are signs inflation will continue to ease in the short-term.

Despite that news, which would on the surface appear to be good for the economy and for investors, we are seeing renewed spikes in volatility, with uncertainty again creeping into the Australian housing market.

That uncertainty, and the desire to find alternative assets which can protect and grow wealth in all parts of the market cycle, has always been a major factor driving investment demand for pink diamonds.

When you couple that pure investment driver with the desire of people the world over who wish to own and display rare tangible items of exquisite beauty, you have a potent mix for higher pink diamond demand, and higher pink diamond prices.

This week we explore another factor which suggests now is a great time to be looking at incorporating these assets into a well-diversified portfolio.

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While pink diamonds have been the long-term market leader in terms of asset price growth, they will always remain something of a niche asset, which in many ways is part of their appeal.

In saying this, we mean that while pink diamonds are accessible to all, most investors tend to stick with more mainstream assets, like stocks, bonds, real estate and cash for a range of reasons.

It’s only those investors who don’t want to follow the herd, and who are willing to put in the extra research to learn about assets like pink diamonds, who are able to reap the rewards that they can offer.

And while the market’s attention will in all likelihood continue to be primarily focused on mainstream assets, and the factors that drive these assets, such as interest rates and inflation, there is another catalyst building.

This catalyst is the US dollar.

Below, we look at why the trend in the US dollar is one factor set to propel pink diamond prices even higher going forward.

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