Diamond Investments

Diamond Investments have been as gemstones since the ancient times. Popularity of diamonds has risen since the 19th century because of successful advertising in spite of a greatly increased supply. Diamonds are not normally as a mainline store of value during times of crisis, because of their lack of fungibility and low liquidity. However, they may still be useful during times of hyperinflation. Approximately 20% of mined diamonds are in jewelry and 80% for industrial uses. Chemical vapor deposition to produce synthetic diamonds, which, unlike diamond stimulants, inherit all the properties of gemstones formed in nature. There is no natural shortage of diamonds. Diamonds synthesize at much lower cost than the equivalent natural diamond price, and the chemical and structural purity of a synthetic diamond can exceed a natural one. However, the chemical composition is not the only factor that determines their value - the quality of the cut is of as much, if not greater, importance. Today a few funds are investing in diamonds. These funds purchase unique diamonds; each stone check by a few professionals and negotiated until the fund decides to purchase it. Then a marketing team goes into action and through an extensive work, the fund yield gain. Between 2007 and 2008, the price of a diamond from the top range of color, clarity, cut and carat went up by over 50%. Polished and rough diamonds lack some of the desirable attributes of investment vehicles, including liquidity, homogeneity and fungibility. Grading and certification by recognized laboratories goes some way to redressing this. Weight and cutting proportions are parameters precisely measured. Color and clarity grades are parameters, which need to be determined by gemologists. The increasing quality and size, and decreasing price, of synthetic diamonds also presents a threat to the value of polished diamonds as a long-term investment. The possibility of low-cost ultra–high-quality diamonds becoming available in industrial quantities at some time in the future is not an encouraging prospect for long-term investors in diamonds; however, synthetic diamonds manufactured since the 1950s and have yet to make a major impact on the market. A cautionary example of such a price fall caused by introduction of a new stimulant strongly undermining the prices of a natural gem was the permanent fall in natural pearl prices with the introduction of cultured pearls. The mechanism by which prices affected is complex. In part because of the social acceptability of wearing cultured pearls to much of the market, customers migrated from the natural to the lower priced cultured product. This altered the supply and demand situation for natural pearls and perhaps the overall prestige of pearls in general lowered. Where synthetic stones are less socially acceptable to the market for the natural version, arguably as with synthetic markets, natural and synthetic, are mostly separate, the prestige of the natural stones has been, with effort, retained. Thus, increased availability and lowered prices of synthetics may or may not have major implications for the future price of natural diamonds. In addition, the introduction of synthetic rubies in the late 19th Century did not appear to have a permanent effect on the price of natural rubies. 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. Until recently, this did not exist for diamonds. Diamonds subject to value added tax in the UK, EU, and sales tax in most developed countries, therefore reducing their effectiveness as an investment medium. Most diamonds are through retail stores at very high profit margins. As diamonds in larger become increasingly rare and valuable, any easily visible and readily understood pricing system has been difficult to establish. The Rapaport Diamond Report is relatively expensive to subscribe to, and as such is not readily available to consumers and investors. Each week, there are matrices of diamond prices for round brilliant cut diamonds, by color and clarity within size bands, and also other shapes. The price matrix for brilliant cuts alone exceeds 1,400 entries, and even achieved only by grouping some grades together. There are considerable price shifts near the edges of the size bands, so a 0.49 carats (98 mg) stone may list at $5,500 per carat = $2,695, while a 0.50 carats (100 mg) stone of similar quality lists at $7,500 per carat = $3,750. This may appear such a large difference as to defy logic, but in reality, stones near the top of a size band tend to be up rated slightly. Some of the price jumps related to marketing and consumer expectations. A buyer expecting a 1 carat (200 mg) diamond solitaire engagement ring may be unprepared to accept a 0.99 carats (198 mg) diamond. There are numerous diamond-grading laboratories, and there is no easy way for investors, consumers, or even dealers to know the relative competence and integrity of each. Even the market-leading Gemological Institute of America (GIA) suffered embarrassment recently when a small number of large, important and valuable diamonds were over graded, resulting in legal action by one dealer against the dealer who had submitted them to the GIA for grading. A number of GIA employees left after the scandal emerged, and the GIA has changed a number of its procedures. There are also a number of laboratories affiliated to Jewelry Confederation. There must be commercial pressure on all labs to upgrade marginal stones or lose business to other labs that are prepared to reduce standards. The non-linear pricing of different sizes (weights) of diamonds means that it is not realistic to exchange. With commodities such as gold, it is clear that one twenty gram bar is worth the same as two ten gram bars, assuming the same quality. In most terminal markets, there needs to be a readily available standard quality, or limited number of qualities, available in sufficient quantity to be tradable. This is a major factor, which affects liquidity. The large number of variables in diamond quality makes commodity-like pricing difficult. There are fashion and marketing elements to take into consideration. De Beers expends marketing efforts to encourage sales of diamond sizes and qualities, which produced in relatively large quantities. They have to take steps to discourage investment, primarily because they perceive that bubble prices, which followed by sharp falls, are bad for long-term consumer confidence in diamonds as a long-term store of value. Diamonds are primarily a consumer item. The main positive investment parameter of diamonds is their high value per unit weight, which makes them easy to store and transport. A high quality diamond weighing as little as 2 or 3 grams could be worth as much as 100 kilos of gold. This extremely condensed value and portability does bestow diamonds as a form of emergency disaster fund. People and populations displaced by war or extreme upheaval have utilized this property successfully. The arguments given mean that it is almost certain that diamonds cannot commoditize sufficiently to allow efficient and liquid markets. This does not mean, however, that diamonds can never considered as investments. A speculator who was prepared to make a market in diamonds could use the very lack of liquidity itself. Any such investor would need to ensure that he maintained sufficient personal liquidity to avoid distress selling, except by others. Such an investor would need to expend effort to market his stock and to advertise his readiness to buy and would effectively become a trader rather than investor.

American Silver Eagle

The American Silver Eagle is the official silver bullion coin of the United States of America. The United States Mint first released it in November 1986. It struck only in the one-troy ounce size, which has a face value of 1 dollar and guaranteed to contain one troy ounce of 99.9% pure silver. The United States Mint certifies its content, purity, and weight. Silver Eagle bullion coins, along with American Gold Eagle bullion coins are viable investment alternatives to the gold and silver bullion coins produced by other countries. To ensure wide distribution of the coins, the United States Mint awarded a contract to Grey Advertising to assist in marketing and publicizing the coins domestically and internationally. The design on the coin's obverse taken from the "Walking Liberty" design by Adolph A. Weinman, which originally had been used on the Walking Liberty Half Dollar coin of the United States from 1916 to 1947. As this iconic design had been a public favorite—and indeed one of the most beloved designs of any United States coinage of modern times, silver or otherwise—it revived for the Silver Eagle decades later. The obverse inscribed with the year of minting or issuance, the word LIBERTY, and the phrase IN GOD WE TRUST. The reverse is by John Mercanti and portrays a heraldic eagle behind a shield; the eagle grasps an olive branch in its right talon and arrows in its left talon, echoing the Great Seal of the United States; above the eagle are thirteen five-pointed stars representing the Thirteen Colonies. The reverse inscribed with the phrases UNITED STATES OF AMERICA, 1 OZ. FINE SILVER ONE DOLLAR, and E PLURIBUS UNUM as well as the applicable mintmark. Like the American Gold Eagle and American Platinum Eagle bullion coins, the United States Mint does not sell Silver Eagle bullion coins directly to the public. In order to provide "effective and efficient distribution, which maximizes the availability of the coins in retail markets as well as major investment markets" the Mint utilizes a network of authorized purchasers to distribute the coins. The coins sold in bulk at a premium over the spot price of silver. The coins sold to banks, brokerage companies, coin dealers, precious metal firms, and wholesalers that meet the following requirements. Be an experienced and established market maker in silver bullion coins. Provide a liquid two-way market for the coins. Be audited annually by an internationally accepted accounting firm. Have an established broad base of retail customers to which to distribute the coins. Have a tangible net worth of $5 million. 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