News

The below article originally appeared in Financial Times. The original version of this article can be viewed here.

Prices for the rarest stones from Rio Tinto‘s defunct Australian mine have long outperformed mainstream investments.

Four years after Rio Tinto closed its Argyle diamond mine in remote Western Australia, the Anglo-Australian group is attempting to stimulate the eponymous brand, which it has no plans to relinquish despite its dwindling inventory.

“Argyle pink tender diamonds have outperformed all major equity markets over the past two decades, achieving double-digit price growth in that time,” points out Patrick Coppens, general manager for sales and marketing at Rio Tinto Diamonds.

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It is hard to believe it has now been almost four years since the Argyle Diamond Mine, source of more than 90% of the world’s pink diamond supply, shuttered for good, with operations at the mine brought to a halt in late 2020.

The closure of the mine coincided with the emergence of COVID, the slashing of interest rates, and the deployment of trillions of dollars of fiscal and monetary stimulus. As governments tried to limit the economic fallout from the pandemic, all of these factors combined together to spark a huge bull market run in the price of pink diamonds, with these assets front page news from an investment perspective back then.

The price increases that were seen in that period were enough to push the total return generated by pink diamonds from the year 2000 onward to more than 600 per cent, comfortably outperforming more mainstream investments like shares and property.

Wind the clock forward to today, and it is fair to say that the pink diamond market is more subdued. However, this is not a reflection of any problems with pink diamonds themselves, nor the long-term outlook for investments into these assets.

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We are already more than halfway through 2024, with the calendar ticking over into July a couple of weeks ago.

While markets gyrated in their regular fashion, it was overall a rewarding one for most investors, with nearly all major asset classes recording increases in the six months to June 2024.

This includes the local share market, with the ASX eking out a small gain (circa 5%), while overseas markets including the S&P 500 in the United States were far stronger, rising by 17% YTD; and Bitcoin is up 30% so far this year, even after its recent correction.

Economy-wise, we also continue to see a trend of inflation that is stickier (which is to say, higher) than most market commentators and experts predicted, while economic growth has not only proved more resilient than forecast, but also looks to be increasing as the second half of the year gets underway.

This in turn has led to a scenario where interest rates in much of the world have stayed higher than expected in 2024, and indeed may go higher still in some countries. Most commentators were expecting and predicting a series of rate cuts this year, and while this has happened in many countries, it is not yet a completely global trend.

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It’s hard to believe that the year is already one-third of the way through.

For investors, it’s been a year of uncertainty thus far, with stock markets giving back all of their early gains (in Australia at least), and property markets starting to slow down. The high-risk cryptocurrency market has remained notoriously volatile, with Bitcoin down almost 15% in the last month, and back below where it was trading in November 2021.

In terms of the pink diamond trade, it’s been a quieter quarter as investors sit tight on their holdings. Market conditions have seen demand and overall turnover level off.  While we’re currently not seeing the spectacular growth from a few years back, prices continue to stay steady, mainly driven by supply constraints.

Moving forward, we expect a range of catalysts, from persistent inflation to warnings of an economic slowdown in both Australia and other parts of the world to push demand, as well as prices, higher.

Interest rates, which way they are going to move, and their impact on investment markets lie at the heart of the evolving outlook for the pink diamond market, and why we believe things look favourable for our favourite investment and asset class.

Find out more below.

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This week’s market update builds on recent publications, which have looked at how investors can use their superannuation to invest in pink diamonds, as well as recent rulings from regulators that, prima facie, make it easier for Australian investors to gain exposure to pink diamonds as an asset class.

We’d like to thank readers who have sent through feedback and/or questions – as it is clearly a topic of interest.

To that end, this week’s article focuses not so much on how local investors can buy pink diamonds, but rather why, with a look at some factors specific to Australia that are encouraging investors to include these assets in their portfolio.

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This week’s market update has a distinctly local focus, looking at using superannuation to invest in pink diamonds.

Based on the feedback we regularly receive, this is a subject that we know is of huge interest to our client base, which is no surprise given that superannuation is in many cases becoming the largest financial asset most Australians are building.

Below, we discuss the trends in the superannuation space, along with a statement released by the Australian Taxation Office (ATO) regarding purchasing pink diamonds inside a SMSF.

Please do note, the following is for informational purposes only, and does not constitute financial advice, either general or specific. You should assess whether the information is appropriate to your individual financial circumstances before making an investment decision.

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It is halfway through February, and it feels like the year is now properly “up and running” with people back from their holidays, and investors, including those that buy pink diamonds, looking at all markets, and working out what to do with their portfolio this year.

So far, what they would be seeing is a slowdown in the local property market, and minimal movement in the stock market, with the ASX -1% since the start of the year.

They would also be reading news that suggests we have likely seen the peak in interest rates globally (Australian rates may go a fraction higher, though even this is uncertain), and central banks likely to cut rates substantially as we approach the second half of 2024.

Should this come to fruition, it will have bullish implications for pink diamonds, as we discuss below.

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It’s hard to believe that it is already February.

We hope that you had a wonderful and relaxing holiday period with family, friends and loved ones, and are now fully re-energised to take advantage of the opportunities this year will bring.

On behalf of the entire Australian Diamond Portfolio team, we look forward to serving you again in 2024, which we believe is shaping up as another wonderful year for pink diamond investors.

We touch on some of the reasons why we have such an optimistic view of the pink diamond market below, with future versions of these market updates delving into these factors in more detail in the coming weeks and months.

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This will be Australian Diamond Portfolio’s final market update for the year, with the year fast drawing to a close.

As we highlight below, 2023 has been another very pleasing year for the pink diamond market, with investors in these assets continuing to see growth, despite the many economic and financial market challenges that have been faced across the course of the year.

This is something we expect to see carried over into the new year and beyond, with the natural scarcity of these assets, combined with their sheer beauty, and growing demand all contributing to continued price growth.

We touch on these issues below, as well as give our heartfelt thanks to all our clients at Australian Diamond Portfolio who make this job so very enjoyable.

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It’s hard to believe we have already reached December, with Christmas now just two weeks away, and a New Year fast approaching on the horizon.

This time of the year is usually the perfect time to take a break, spend time with loved ones, and recharge ahead of another year that will no doubt bring further challenges, as well as opportunities for all of us, including in the investment world.

To that end, many Australians will be saying a silent thank you that the Reserve Bank of Australia (RBA) decided to keep interest rates on hold at their meeting last week, with the local cash rate still sitting at 4.35%.

While this is good for anyone with a mortgage, it is too early to pop the champagne, as rates may still go higher in early 2024. It also poses an ongoing challenge to one of the other great threats that investors are facing today: inflation, and how to protect and grow wealth in an environment where the real value of many of our assets, and the savings that we have in the bank are being eaten away.

Enter pink diamonds. Not only are they tangible, beautiful, stable and proven performers over the long-term, they are also trusted inflation hedges with a strong history of protecting purchasing power in environments like the one we face today, where consumer prices are rising at a rapid pace.

And, as we will highlight below, the outlook for pink diamonds, and the support underpinning this market is only strengthening, with results from the recent Rio Tinto pink and red diamond tender blowing the market away.

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