19 Feb

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%.

Note too that the chart above reflects in performance of coloured diamonds in US dollars. Local investors, including clients of Australian Diamond Portfolio, have also benefitting from the decline in the value of the AUD, which has fallen by 14% versus the USD over the time period captured in the chart.

These figures reinforce the importance of working with specialists in this field, with the strong outperformance of pink diamonds justifying why we tend to focus on those diamonds for our clients at Australian Diamond Portfolio.

Expert Sees More Gains to Come

Experts remain convinced of the upside potential in pink diamonds, despite prices seeing only gradual increases in the past few years. FCRF Advisory Board member Jim Pounds in part attributes the slower pace of price growth and outright price declines for yellow diamonds to a “a ripple effect caused by the double digit decrease in the colourless category in the last few years.”

Pounds remains confident in the outlook for this unique asset class, noting that “from the mining perspective we are currently experiencing a shortage in high quality fancy colour rough and we therefore feel quite optimistic about the future.”

No doubt Pounds is referring to the pending closure of the Argyle Diamond Mine, which will shut this year, instantly cutting off the production of some 90% of the world’s coloured diamonds.

For those of you interested in the closure of the Argyle Diamond Mine, and its implications for the pink diamond market, we encourage you to revisit this Australian Diamond Portfolio special report, which we published last year.

Argyle Special Report

Mine image © Rio Tinto 2020

Updated Diamond Guide on its Way!

In the coming weeks, we will be releasing an updated version of the Australian Diamond Portfolio investment guide. Whilst many of you will have seen this report in the past, this year’s report will contain the latest performance figures for both pink diamonds and other asset classes, with diamonds still the clear winner in terms of long-run performance.

That is something we expect will continue in years to come, even if performance over the last few years has been subdued, relative to the long-run average. It is only a matter of time before the global economic slowdown, expensive equity markets, central bank money printing and rising geopolitical tension lead investors to seek out tangible hard assets.

When it does, the flows of money into pink diamonds, and the impact that flow of money will have on their prices, is likely to be profound.

As always, we hope you’ve enjoyed this week’s edition of “In the Loupe” and look forward to any questions or comments you may have.

 

Share this