Diamonds have long been known to offer great investment opportunities but historically, how have they performed?
What Determines the Cost of a Diamond
Naturally, the size of the diamond will determine the price. Large diamonds that weigh three carats or more will be worth more but then they are susceptible to price fluctuations more than those that weigh less than 2.99 carat.
How Have Prices Developed Through the Years?
Over the last 15 years, diamonds that have a weight of more than 4 carats have seen exceptional increases in price. Between 2004 and 2008, prices tripled while smaller diamonds experienced smaller price increases.
While diamonds are different to other investments such as gold, the demand for diamonds fluctuates and with that comes a fluctuation in price. Over the past 40 years, it is believed that the price of high-quality diamonds has dropped but that can be put down to inflation. So, if you take inflation into consideration then certain diamonds have lost as much as 80% of their value although mining, production and distribution can all affect the price.
Despite this, the health of the economy drives the price of diamonds and this has shown that it has increased in value through the years. The available data suggests that over the last ten years, the price has increased by 33%, which shows that it has an average increase of around 3.3% each year. However, it has been seen that the price can fluctuate from high to low by around 5% to 7% and back in 2008, the financial market collapse caused the price of diamonds to decrease to its lowest of more than 12%. This is a significant drop but in 2011, fortunes were reversed as the price of diamonds increased to 20% as a result of an increase in demand. This proves that the historical price of diamonds is affected by a range of factors. This could relate to changes by manufacturers and wholesalers. Mining also has an impact as this can change, leading to the mining of different types of diamond sizes, causing price fluctuations.
In recent years, economies have flourished around the world and with that has come a desire for luxury goods while the mining of diamonds has seen a decline too. What this has meant is that diamond prices have increased. Despite this, at this current moment in time, the covid-19 pandemic has impacted the global economy and that could have a significant impact on the price of diamonds.
What About the Future?
The reality is that diamond prices have increased steadily since the 1960s and only in 2001 and 2008 did we say any significant drop in prices. Therefore, once the current pandemic has passed and economies recover, the price of diamonds should continue to increase in the way that they have done.
Many will say that diamonds are not a good investment but this is not true. If you purchase a diamond from a trusted seller and at a good price then it will become one of the best commodities that you can own.