26 Feb 2020

Diamonds Rock Solid as Markets Tank

It has been a week of cascading losses on global equity markets, as fears over the spread of coronavirus continue to spread. Far from being contained as we all hoped, it looks to have spread, with the number of cases seen globally rising by the day.

The impact on the economy will be meaningful, with United Airlines withdrawing their forecasts for 2020 due to the impact of the virus. They have reported a 75% decline in near term demand for flights to the Pacific, and essentially a 100% fall in demand for flights to China.

Markets, which at first didn’t seem too concerned about the impact of the virus on the global economy, are beginning to wake up, and the result isn’t pretty.

This can be seen in the table below, which shows the performance of a range of equity markets around the globe. As you can see, it is an unrelenting sea of red, with all of them falling meaningfully.

Markets

Losses were particularly acute in Europe, no surprise given a number of cases of coronavirus have been identified in Italy, with fears that it will spread across the continent.

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19 Feb 2020

Diamond Expert Predicts Prices to Rise

In this week’s edition of ‘In the Loupe’, we focus on the latest performance figures released by the Fancy Colour Research Foundation (FCRF), who in early February of this year published their end 2019 Fancy Coloured Diamond Index (FCDI) results. The FCDI tracks changes in the buying prices of various categories of pink, yellow, and blue coloured diamonds globally.

Pink and blue diamonds held their ground across 2019, finishing the year with slight gains. On a relative basis, they strongly outperformed yellow diamonds, and the FCDI more broadly.

The FCDI as a whole fell by -0.6% in Q4 2019, with results for the full calendar year showing a decline of -1.4% in 2019. Whilst this is obviously well short of the long-run price gains investors have come to expect from coloured diamonds, it is worth pointing out that the overall decline was driven by a more than 5% fall in price of yellow diamonds.

Within the pink diamond subset, the clear outperformer was Fancy Vivid Pinks and Purplish Pinks, with these stones appreciating by 4.4% in 2019, continuing a strong run of gains that has seen pink diamonds as a whole rise by 116% over the last decade.

The increase in the value of pink diamonds is the largest amongst all categories of coloured diamonds. For comparison sake, it is worth pointing out that over the last decade, blue diamonds increased by 81%, whilst yellow diamonds were only up 21%.

Long-run returns are even more impressive, as can be seen in the chart below, which plots the performance of all three categories of coloured diamond (as well as the overall FCDI, which is the grey line) over the past 15 years to the end of 2019.

 

All sizes and intensities in Pink, Blue and Yellow

Diamond Category Growth

Source: Fancy Colour Research Foundation

As you can see, total returns generated by pink diamonds since the start of 2005 are approaching 350%.

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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.

Rio Tinto's Argyle Mine

News released earlier this month confirms that Rio Tinto will be going ahead with the planned closure of the Argyle Diamond Mine this year, with production expected to cease in the final quarter of 2020. Image © Rio Tinto 2020.

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04 Dec 2019

The Case for Pink Diamonds Strengthened in 2019

In this final update for 2019, we are going to review a handful of key points which we think clients of Australian Diamond Portfolio should keep front of mind as they work out how best to structure their investments as we head into the next decade.

The report will review:

  • The performance of pink diamonds in 2019
  • How far equities could fall in the next correction
  • Risks in defensive assets like cash and bonds
  • Why Australia will continue to struggle economically

As you will discover from reading this report, the 2020’s promise to be a very rewarding period for pink diamond investment, with this unique asset class set to benefit from multiple tailwinds.

These include the pending closure of the Argyle Diamond Mine, as well as an economic and financial market environment that will continue to push astute investors toward hard tangible assets.

We trust you will enjoy the report, and encourage you to share it with friends, family and colleagues that you think would benefit from reading it.

 

2019 - Year in review

Image © Rio Tinto 2019

Diamond Demand Strong as Argyle set to Close

Pink diamond demand was strong throughout 2019, with Australian Diamond Portfolio having its busiest year ever. The increase in demand that we saw in our business personally was in line with global trends, best evidenced through the strength of this year’s Argyle Tender.

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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 Argyle 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 Argyle Pink Diamond Tender.

Rio Tinto press release

The press release noted that the 2019 Argyle Pink Diamond 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 Argyle pink diamonds.” 

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 Argyle Pink Diamonds 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.”

Argyle Tender Stone

“In the fancy colour diamond sphere, we pursue ‘more’: more colour, more saturation, brighter tone and more character.” – Australian Diamond Portfolio’s Pink Diamond Investment Guide. Image © Rio Tinto 2019.

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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