There is a heated discussion about natural diamonds and lab-grown diamonds in the market. The development of technology has indeed brought people the option of light assets, but does the value of natural diamonds really cease to exist?
The answer is, of course, in the negative.
In “Ocean’s Eight”, Anne Hathaway’s elegant figure wearing the “Jeanne Toussaint” custom diamond necklace from the Maharaja of Nawanagar in India still lingers in my mind.
The “Jeanne Toussaint” necklace, a replica of the diamond necklace originally commissioned by the Maharaja of Nawanagar in India in 1931, was personally designed by Jacques Cartier, the grandson of the founder of Cartier. The replica, crafted from 100 natural diamonds, is estimated to be worth over $150 million.
The Tiffany yellow diamond “Ribbon Roset” necklace worn by Audrey Hepburn in “Breakfast at Tiffany’s” is an instant classic.
The main stone of this natural diamond necklace is a world-renowned and high-quality natural yellow diamond weighing 128.54 carats. Designed by Jean Schlumberger, this piece is valued in the eight-figure range.
Why do these well-known film and television works choose natural diamond jewelry as the protagonist of their stories?
It is because the collectible and investment value of natural diamonds is widely recognized and prevalent. However, unfortunately, natural diamonds that truly possess investment value are extremely scarce.
“Scarcity” ensures steady growth
Looking at the contemporary natural diamond industry chain, we will find that the concept of “rarity” runs through it from start to finish
The formation of natural diamonds requires billions of years of evolution under high temperature and pressure, and the conditions for their formation are extremely demanding, resulting in a very scarce total reserve.
There are approximately seven major natural diamond producing regions worldwide. Currently, the mining costs of these sources are escalating, and no new sources have been discovered.
Only about 20% of the total natural diamond production can initially meet the gem-quality viewing requirements. After further fine screening and cutting, and deducting the possible losses and failures, the finished natural diamonds that enter the market each year account for less than 4% of the total diamond mining output.
Among them, the proportion of natural diamonds that can simultaneously meet high standards for carat weight, clarity, color, and cut is even rarer.
In fact, from a historical perspective, natural diamonds, as physical assets, possess remarkable resilience against inflation and currency fluctuations. Even during periods of economic instability, the value of natural diamonds remains relatively stable.
In an interview with The Paper this year, David Kellie, CEO of the Natural Diamond Council, admitted:
“Sales of (natural) diamond jewelry experienced significant growth in 2021 and 2022, reaching historical highs at one point. Compared to the previous peak last year, prices have declined, but they saw an increase in the final quarter, and including the first few weeks of this year, the upward trend continues.”
Based on the estimation of the diamond selling price base derived from international diamond quotations over the past 10 years, the average annual increase rates for 1-5 carat round diamonds corresponding to their respective grades are as follows:
1 carat – up 7.0% (E.IF)
2 carats – up 8.2% (D.IF)
3 carats – up 14.3% (D.IF)
4 carats – up 15.2% (F.VVS2)
5 carats – up 17.9% (F.VVS2)
The appreciation potential of natural diamonds is unpredictable. What is certain is that high-quality natural diamonds consistently yield high returns in long-term investments. According to estimates, the annual investment return rate for high-grade natural diamonds can reach 15%, and even a 1-carat natural diamond can generate approximately 1% in returns.
However, it is evident that the investment threshold for natural diamonds is relatively high, requiring a budget of at least 100,000 yuan to just meet the investment threshold for a 1-carat natural diamond.
In addition, natural diamonds are more suitable for long-term investment. Generally, it is more cost-effective to hold natural diamonds for more than 5 years before cashing them out. Moreover, the buying and selling of natural diamond investments must adhere to strict industry standards. For example, the diamonds themselves must meet or exceed the “4C” standards (carat weight, clarity, color, and cut), and investment diamonds must have a testing certificate issued by a credible diamond appraisal institution.
The lengthy prelude did not dampen the enthusiasm of investors, as natural diamonds always perform impressively in liquidation or auction. Taking the Phillips Geneva Spring Jewelry Auction this year as an example, a total of 131 lots were presented at the auction, with a total transaction amount of 23.6 million Swiss francs. The top two lots in terms of transaction price were both natural diamonds. Notably, the second-highest-priced lot, a high-round brilliant-cut red diamond, set a record for the auction price per carat and total price of a pure red (Fancy Red) natural red diamond.
The top-selling item in the auction was a 6.21-carat oval-cut pink diamond, which was appraised as having a Fancy Vivid Pink color grade and a Very Slightly Included (VS1) clarity grade. It sold for CHF 10,869,500.
