Are Diamonds and Precious Stones an Investment? / Avner Sofiov


Diamond and precious stone manufacturer, Avner Sofiov, was invited to lecture at the first gemological symposium held by the European Federation of Gemological Laboratories in late January in Paris. Avner Sofiov, former president of the Precious Stone Exchange, presented the 300 symposium participants with his views on the question whether diamonds and precious stones should be considered an investment

Many years ago, I was sitting in Paris restaurant with the personal advisor of the late president of Egypt, Anwar Sadat – Professor Ahmed El Omar, who purchased rare and especially interesting stones from me and over the years became a friend. We spoke in English, and a woman came over to our table. She introduced herself as Mrs. Dueck, and told us she heard my companion’s Egyptian accent and wane to tell us a story: “My husband and I had a very large underwear factory in Egypt/ In 1967 we had to depart Nasser’s Egypt empty-handed, leaving a great deal of property behind. Fortunately, I managed to take one extremely large diamond that I was able to buy an apartment, care for my husband who became ill following the deportation and begin a new life – all that thanks to the diamond.”

We have heard many moving stories about diamonds that saved the lives of Jews during the Second World War, because of their light weight and high value. And not only wars highlight he fact that the diamond has many more important qualities in addition to its exceptional beauty. In global financial crisis the advantage of diamonds as an asset is also revealed. For example, in 2008 of public we encountered a global economic crisis that led to a loss of public confidence in stocks, bonds, currency and banks.

The citizens of the United States who had put aside money for “a rainy day” awoke one morning to find their savings had evaporated from the bank accounts they had so depended upon. Residents of handsome homes found themselves on the street. And not only individuals lost the solid capital from under their feet. Whole countries found themselves in trouble, at the brink of bankruptcy. The stock market became unclear and unstable, and confidence in currency and shares was shaken. People took to the streets and rioted, presidents fell and the world found itself in a storm of change. At times like that, people seek valuables that they can keep in their pockets. Those who had invested in real NASDAQ also lost 50 percent. Those who had put their capital into the Lehmann Brothers’ bank lost 100 percent. But those who had invested in diamonds are now getting their investment back and even making a profit.

In fact, crisis always encourage diamond sales. We can still remember the period following the terrorist attack of September 11th, 2001 – we were concerned that Americans, known for their love of spending, would refrain from Christmas shopping. However, as the holiday approached we were surprised to discover that the crowds grew and the cash registers kept ringing, and in the end we enjoyed a very strong Christmas season, indicating once again that in times of crisis, people turn to diamonds.

In considering the appeal of diamonds as an investment, we should examine the present situation. The sources of rough are running out, there are no new sources on the horizon and it will take many years before any enter the diamond pipeline. Furthermore, along with a growing demand for the final product, which pushes the prices up, new markers in India and China are also developing rapidly.

In addition to being an asset that is accessible, easy to transport and holds its value, diamonds are also relatively inexpensive. For example, the price of a 1-carat diamond, color F, VS clarity is lower than that of a Chanel of Hermes bag, And while the luxury bag is not an investment and in fact will probably be given away or forgotten in the closet a year later, diamonds – as the famous slogan goes – are forever. They are passed from one generation to the next or sold for the original price paid or higher.

An Investment Item  

The world of diamonds in 2012 is completely different to the world of diamonds in 2002, for example and all the more so that of 1992, not to mention 1982. The dynamics are remarkable. In the past, it was possible to sell anything when the market was good, but today some things sell and others don’t. Today’s diamond world is one of items and niches, each with its own fate and luck. Therefore, if a diamantaire has a great deal of merchandise, he cannot be sure it will sell, because they might not be the right goods, that is to say, those in demand in the current market.

And if not every stone is suitable for sale, it is all the more true that not every stone is suitable for investment. The value of special diamonds, such as blues or pinks, is constantly rising.

The idea of purchasing diamonds for investment is gaining force. In recent months we have seen the appearance of companies that offer diamond investment, an innovation that indicates the adaptation of their investment portfolios to the new situation. In a piece entitled “Diamonds: A Safe Investment,” the French magazine Bilan reported that leading investment advisors at a meeting in Geneva displayed lively interest in diamonds as an investment. The conference participants agreed that 2012 is a good year for investing in tangible assets. Diamonds. According to the article, are worth 14 thousand times more than gold: a gram of gold costs 57 dollars, and a gram of diamond costs 750,000 dollars. The article reported that Michal Tamisier, founder of the Geneva-based consultancy, Elite Advisers, which originally invested in wine and watches, has also opened a diamond-investment fund, Devine Jewels, offering its customers a potential 10-percent profit a year.

The American Harry Winston brand – which has already demonstrated its long-range vision by positioning itself along the entire value chain in the diamond industry, from rough production (the Canadian Diavik Mine) to sale of diamond jewelry in an American retail chain – has established a fund for polished diamond investment in cooperation with Diamond Asset Advisors. The fund transfers diamonds on consignation to Harry Winston, which sets then in the jewelry and watches it sells in the marketplace.

A very large diamond investment fund has also been established in Dubai, focusing on the special diamond market. And these are just some of the examples.

Identity and Caution

Investors today have some very interesting options. On the public, open side there is the Internet, offering a high level of access to detailed information as well as stones from all corners of the world. On the especially interesting platform for buying special diamonds. I both, the buyer and needs knowledge in the area of treatments and imitations , a cautious approach for correct identification of stones by consulting the websites of gemological laboratories and checking the match between the stone and the certificate, and careful study of the field of auctions and how to make the right purchases. In the 21st century, the diamond is no longer an anonymous item. Every stone has a full identity, allowing the bank to buy and sell it with full confidence in such a fragile world as ours today, where people are seeking to diversify their investment portfolios, diamonds provide a fitting channel.

The Federation of European Education Gemology  

Avner Sofiov’s lecture, excerpts of which are presented here, was delivered on January 19, 2012 at the symposium at the first international general assembly of the Federation of European Education in Gemology. The Federation, founded 14 years ago, includes ten European gemological institutes, located in France (branches in Paris, Lyons and Nice), Belgium (two school), Austria, Germany, Italy, Spain (in Barcelona and Madrid), Holland and England, Once a year, graduates of the four year course in gemology  gather for the presentation of certificates. This year, on the occasion of the fiftieth anniversary of the Institut National de Gemmologie in Paris, the Federation decided to establish a new tradition of holding an annual international gemology symposium at the time of the graduation ceremony

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