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Diamond trumps gold as hedge for the rich
GENEVA/LONDON: In a packed Christie’s auction room in Geneva, one could hear a pin drop as two anonymous bidders slugged it out in their quest to own the world’s
GENEVA/LONDON: In a packed Christie’s auction room in Geneva, one could hear a pin drop as two anonymous bidders slugged it out in their quest to own the world’s most exquisite blue diamond.
When the auctioneer’s hammer came down, spontaneous applause broke out as the winner, who retained anonymity, bought the 14.62-carat Oppenheimer Blue for a world record $57.5 million for any jewel sold at auction.
With new fortunes being created around the world faster than at any time in history, wealthy investors are looking at different ways of protecting cash that now earns close to zero percent interest in bank accounts, while asset market turbulence can wipe out millions in hours. Some are eyeing rare diamonds as a best friend, or long-term haven at least.
Gem specialists are keen to play up rare diamonds as “safety” investments, or at least a way to hedge against currency, stock and bond market volatility at a time of political and economic uncertainty.
“The big players are looking at diamonds in a different way,” said Ehud Laniado, chief executive of Cora International, which sold the 12.03-carat Blue Moon diamond for $48.4 million at a Sotheby’s Geneva sale in November, a world record for any jewel sold at auction at the time. “They are not looking at them just as a jewel, but as an asset that has a resale value.”
Citigroup said the outlook for gold remained uncertain and in such a scenario, investors may look at a next-best alternative such as diamonds.
However, the diamond investors’ club is shut to most ordinary savers. While some are making efforts to create a liquid market, the process has been slow. Entry level for Sciens Coloured Diamond Fund II, one of the more established closed-end funds now shut to new investors, is $1 million. It invests in diamonds in rare colours such as red.
Prices of vivid and intense colour diamonds have risen 10 to 12% a year on average since 1959, according to Baldwin. However, dealers said white diamond prices had not gained as quickly in recent years and were largely flat in 2016.
