Penny Stocks For 2011

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The Price Of A Diamond

The story behind how a diamond is acquired give the stone its real value.What once was a simple gold band for weddings now came with diamonds embedded in them. Sentimental value adds value to this beautiful stone. Possibly because of how the buyer acquired it and the financial straits said buyer went through just to acquire a diamond as investment .

Diamonds used to be a rarity. Back in the day, De Beers used to be the only company that sold real diamonds after World War II. Real diamonds are no longer restricted to De Beers, as the company gained more competitors through the years. Add that to the “buy high, sell low” market that diamonds have, a diamond is a great investment. However, diamond stud earrings still sell at a pretty penny more than any other stone because of how it is acquired.

The increasingly limited amount of diamonds in mines drive the price of diamonds up. Diamonds are getting more difficult to acquire because of the limited number of diamond mines. This means that diamond companies raise the price according to the output that they produce. Jewelers are encouraged to buy diamond pieces at a low price, so you cannot really sell a diamond for however much you bought it.

The absence of new diamond mines means diamonds are expected to get more expensive in the coming years. Clearly, supplies going down means demand for stud earrings going up. Diamond producers increase the price of diamonds according to how many are available for them to produce. The diamond price does not see a decrease even if supplies are running low. Both rough and polished diamonds increase in price with rough diamonds commanding more cost than polished ones.

This of course puts diamond cutters in a tight spot. Since unpolished, uncut diamonds fetch a higher price in the market, diamond cutters and manufacturers might find their businesses seeing an all time low. This does not put them out of business, however, since polished diamonds are still sold at a higher price in the world diamond market. This forecast might mean that opening a diamond cutting facility will not be as profitable as simply distributing or investing in the world diamond market’s stock.

Asia has been competing in the diamond market, with China being the consumer of 5% of the global diamond market’s polished diamond jewelry, according to of the major purchases come from China and Southeast Asia, says Brian Mennel, chairman of Special Situation Diamonds in London, in an interview with Forbes’ Russel Flannery. However, in the same interview, the forecast for China investing in diamond mining looks vague. 45% of the mining and distributing end of the market still belongs to De Beers.

Whether you are selling, buying, or investing in stocks that involve diamonds, it is always best to look at each year’s future forecast for the product. As De Beer’s campaign slogan goes, “Diamonds are forever.” But keep in mind that an investment does not last as long.

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