As the price of diamonds has appreciated, the market is again seeing attempts to promote the gems as an investment.
A Rye Brook, N.Y., investment firm, IndexIQ Advisors, filed paperwork with the Securities and Exchange Commission for permission to list what is believed to be the first U.S.-based exchange-traded fund to invest in diamonds. The IQ Physical Diamond Trust would hold natural 1 ct. diamonds certified by the Gemological Institute of America, says the SEC filing.
“The diamond market has been less prone to the cyclical price fluctuations typical of many commodities due both to its retail product nature and the strong market position of major market participants,” the filing says. A rep for IndexIQ Advisors declined comment, citing the SEC-mandated quiet period before going public.
Last August, Pinnacle Diamonds, a company in Sherman Oaks, Calif., began running advertisements on CNN, Fox, and conservative radio shows, touting diamonds as “the new gold.” According to the ad: “Successful investors are converting their current gold holdings into diamonds.”
A sister company to a gold investment business, Pinnacle sells consumers half-carat D-E-F diamonds and then guarantees it will buy them back. “Just like gold, just like silver, diamonds are a good way to protect a small part of your portfolio,” president Jonathan Honig tells JCK. “You have a tangible asset in your hand.”
He notes that last year, the price of diamonds grew more than 20 percent, outperforming just about every other asset: “There are so many gold commercials on Fox and CNN, I just figured, why not try to advertise diamonds as an investment?”
He adds that his venture is still getting off the ground, but some investors have made money from buying and reselling the stones.
In Vivid Detail
Courtesy of Sotheby’s
The $12.72 million blue, and the unsold 5.03 ct. pink
An 8.01 ct. emerald-cut vivid blue diamond ring was among the main attractions at the Sotheby’s Hong Kong Magnificent Jewels and Jadeite Sale April 3. It sold for $12.72 million, the second-highest price per carat ever for a blue diamond at auction.
The sale also featured a pair of notable pinks: A 3.28 ct. pear-shape internally flawless fancy vivid pink diamond and white diamond ring fetched $3.2 million. However, a 5.03 ct. pear-shape fancy vivid pink diamond ring—which was estimated at $5.4 million to $6.7 million—failed to sell.
“Diamond engagement rings and loose stones are very flat. Necklaces are a little flat as well, with the exception of one of my best-selling styles—the diamonds by the yard look, a consistent seller in white and yellow gold in a variety of lengths and diamond sizes.”
—Alex Weil, president, Martin’s Jewelry, Manhattan Beach, Calif.