Look Who's Touting Diamonds as a Commodity

Diamond investments are being viewed as increasingly attractive as a result of recent trends that suggest a diminishing global supply.
Whether this is true or not unlike the diamond boom of the late 70's up to 1980 orchestrated by De Beers to flush out stored rough this time the price increases seem to be due natural forces of supply and demand.
It is always in the back of my mind that polished and rough diamonds lack some of the desirable attributes of investment vehicles, including liquidity, homogeneity and fungibility.
Fungibility does not imply liquidity, and liquidity does not imply fungibility. Diamonds can be bought and sold (the trade is liquid), but individual diamonds are not interchangeable (diamonds are not fungible). Zimbabwean dollar bank notes are interchangeable in London (they are fungible there), but they are not easily traded there (they are not liquid in London).
You either love the diamond business or you don't.
Those of us who held stock in the last three years have made handsome capital gains. Those of of us who took advantage of the weak US dollar only a couple of months ago are also reaping huge benefits. One however should only "invest " in diamonds if they can afford to. Any investor knows to minimise any potential losses common sense says retain a sensible balance.
Diamonds are not especially liquid. There are several factors contributing to low liquidity of diamonds. One of the main is the lack of terminal market. Most commodities have terminal markets, and some form of commodities exchange, clearing house, and central storage facilities. This does not exist for diamonds. Diamonds are also subject to value added tax in the United Kingdom, Europe, Goods & Services Tax in Australia and sales tax in most developed countries, therefore reducing their effectiveness as an investment medium.

Hedda the best point you make is "In the past”, we are in a new paradigm and the reality on the ground has changed the standard operating procedures of what to do with your money. Art purchased by the well informed buyer has been an investment with large upside, which is holding strong in this market. Should one invest in mutual funds now it may not be a good bet. While Diamonds are a gift of love they are also a great store house of value that hedges inflation, actually comfortably outpacing inflation and increases in value as a diminishing resource. In these times when risk is everywhere diamonds are one of the few safe stable items of value the owner holds and controls with out having to trust Bankers or esoteric financial products and the companies that created them. Steady growth (hedge against inflation), virtues making diamonds similar to a currency and the reasons mentioned above are why value in diamonds is being looked at as a means to move forward in this economic environment. Market down 700 points today.

In the past, when asked by outsiders about "investing" in diamonds, I always said to invest in a beautiful stone or piece of diamond jewelry like you would in a beautiful piece of art or fine furniture: because you love it and it will bring you pleasure to look at it and use it. A diamond certainly shouldn't go down in value, so you can at least recoup your cost and probably do better--but if you're looking at it as a means to send the kids to college, skip it and invest in a good mutual fund instead. Despite what the market has done of late, I still think for the majority of consumers, mutual funds are better than diamonds for investing. And they're much easier to liquidate.