Fancy Colored Diamonds to Sparkle in 2016

(EMAILWIRE.COM, December 21, 2017 ) PREMIER DIAMOND GROUP (NORTH AMERICA) LTD.
Volume 2, No. 3
January 2016

FANCY COLORED DIAMONDS TO SPARKLE IN 2016

Abby Schultz, Barron’s, December 11, 2015

Hong Kong billionaire Joseph Lau paid a combined $77 million for two fancy colored diamonds at auctions in Geneva last month – $48.4 million for a 12.03-carat vivid blue at Sotheby’s and $28.5 million for a 10.68 carat vivid pink at Christie’s, extraordinary prices for extraordinary stones.
Pink, blue and yellow diamonds are among the hottest collectible and jewelry items this year and that’s not expected to change in 2016.
“Fancy colored diamonds are probably more important today than ever before,” Graeme Thompson, Director of Jewelry, Asia, at Bonham’s said at a recent Hong Kong press event detailing results from the Knight Frank Luxury Index. The term “fancy” is the entry level of color saturation in a COLORED DIAMOND with “fancy vivid” and “fancy deep” having the richest hue.
The luxury index, which track natural colored diamonds as well as jewelry among ten asset classes, including classic cars and fine wine, rose 10% in the past 12 months through September and 63% in the last five years. The category as a whole rose 142% in the past ten years.

Most of that growth is from pink diamonds, up a soaring 315% over the past ten years, and blue diamonds, surging 154% during that time, the Fancy Color Research Foundation reports. Larger white diamonds have risen in value too, but much more slowly, at a growth rate of 5% a year for the last six years, says Knight Frank, citing Mercury Diamond.

Why are natural colored diamonds popular? Well, auctions with headline-grabbing prices are one reason. The biggest factor is that there is “very little supply in the FANCY COLORED DIAMOND market” says Thompson. And, as he says, “people want rarefied things.”

All signs point to an increase in the fancy color trend into 2016 and beyond. The biggest factor is this lack of supply. There are simply fewer color diamonds in the world – only a fraction of one percent of all diamonds, says Tracey Greenstein, director of research at the Fancy Color Research Foundation. Historically, supply has consistently lagged behind demand in all colors, Greenstein says.

Commercially, the rarest of all colored diamonds are pink. About one in 10,000 carats of rough diamonds are fancy colored diamonds of gem quality, and of those, only 0.1% are pink, Bonhams says. Nearly all the supply of pink diamonds in the world comes from the Argyle Mine in Western Australia, which owner Rio Tinto is expected to close within five years. “That will have a huge, huge impact on pink diamond prices,” Thompson says.

The fastest growing sector within the diamond world is yellow diamonds, Chaix says, especially fancy yellow diamonds. Although rare in their own right, yellow diamonds are more available in nature and therefore more affordable, than their pink and blue counterparts.

BURMESE RUBIES, KASHMIR SAPPHIRES, & COLOMBIAN EMERALDS
Colored gemstones are doing extremely well in the auction world too. Especially prized are colored gemstones like Burmese rubies, Kashmir sapphires and Colombian emeralds that are all natural with no hint of treatment of any kind. “We’ve seen quite dramatic price increases for exceptional stones,” Thompson says.

Just last weekend, Bonham’s sold a pair of Kashmir sapphires that were said to be owned by a European princess for GBP 1.5 million (US$2.3 million), topping the estimate of GBP500,000 to GBP800,000. Last week, Christie’s in Hong Kong, sold a 15.04-carat Burmese ruby for HKD142 million (US$18 million) and an Afghan Emerald for HKD17.6 million.
Such major sales……. merely reflect retail prices, Greenstein at the Fancy Color Research Foundation says.

These sales do provide evidence to luxury consumers that diamonds and other precious jewels grow in value over time.

Only a handful of the best jewelers in the world such as Laurence Graff, Tiffany, Bulgari and Winston’s create jewelry using the rarest of colored diamonds and gemstones. Even the better jewelers in the world use a lesser quality grade gem in place of the rarest gemstones because the ultimate cost to the consumer would be too high. More jewelers are turning to semi-precious stones – like spinel, tourmaline and topaz – and they are looking at more easily sourced precious stones, like emeralds from Zambia or rubies from Mozambique.

“They are more reasonably priced and more abundant, for sure,” Thompson says.

“The reason to buy jewelry, as Thompson made a point of emphasizing, is to wear it and enjoy it. But, when you’re spending thousands or tens of thousands of dollars, it also makes sense to consider the investment value of what you’re buying. You may not be able to pay millions for a natural Burmese ruby or natural colored diamond, but you can purchase affordable gems that could rise in value.

Thompson points to a truism of the diamond market: prices rarely go down. “Historically, diamonds are a safe haven,” Thompson says. “There can be some short-term volatility in the colorless diamond market, but both colorless and colored diamonds will be consistently higher over the medium and long term.”

(ZIMI YELLOW DIAMOND FORMATION)
TYPE IB DIAMOND FORMATION RELATED TO GONDWANA ASSEMBLY:
EVIDENCE FROM RE-OS ISOTOPIC COMPOSITIONS OF WEST AFRICAN SULPHIDE INCLUSIONS

Source: The Geological Society of America

Zimi Yellow Diamonds: What Makes Them Unique

As previously discussed, all fancy colored diamonds are rare in nature. Even the most affordable colored diamonds are literally 1 in 10,000. Pink, blue and green diamonds of 1 carat sizes or more in the best color saturation are probably 1 in a million. Within the rarity of fancy diamond color there are sometimes anomalies that come to the foreground. Fluorescent fancy neon yellow green diamonds from Venezuela and fancy vivid yellow diamonds from the Zimi mine in West Africa are 2 examples of incredibly rare colored diamonds that have only come to market in recent years. Fancy yellow Zimi diamonds have the strongest yellow color of any yellow diamond found so far in the world. Recently the Geological Society of America did a technical analysis on Zimi yellow diamonds to find out why they exude such depth of color. The result was astonishing! Zimi yellow diamonds are type 1B and are found in alluvial deposits in Sierra Leone, West Africa. We have always known that yellow diamonds are formed from hydrogen or nitrogen atoms merging with pure carbon under tremendous pressure deep below the earth’s surface. As carbon makes its way up the lava pipe towards the surface, it is exposed to incredible heat and pressure. This causes the hydrogen/nitrogen atoms to merge with the carbon atoms. Zimi diamonds were formed differently. According to the Geological Society of America, Zimi yellow diamonds did not experience temperatures above 700º Celsius for any extended period: When you study Zimi yellow diamonds at the atomic level, the hydrogen, nitrogen and carbon atoms are clearly separate. This suggests that after formation the yellow diamonds at Zimi were rapidly exhumed to shallow depth in the lithosphere, likely through a massive tectonic uplift following a continental collision.

For one possible explanation, we have to go back hundreds of millions of years to the point where all continents of the world were joined together. The land mass was called Pangaea. If one looks at the outline of South America and West Africa, the two continents fit together like puzzle pieces. Perhaps when a series of volcanic eruptions split the continents apart, the extreme pressure from the shifting of the continents forced the major tectonic shift which rapidly brought the Zimi yellow diamonds to the surface. That would explain why the Zimi yellow diamonds did not experience temperatures above 700º Celsius for any extended period, thereby protecting the integrity of one of the rarest colored diamonds in nature.

In terms of commercial rarity, when Zimi yellow diamonds of vivid color saturation come to market they can sell at dealer to dealer prices for $40,000 a carat or more. Perhaps a true bargain for those who wish to own a fancy vivid yellow Zimi diamond can be found in stones of .60 to .75 carats. These stones, although almost as rare as the 1 carat Zimis, are currently selling for about ½ the price per carat. But for how long?

COLORED DIAMOND PRICES: TRENDS 2016 & BEYOND
We have all seen the calamity that has brought about uncertainty and fear among investors in today’s stock markets, bond markets, commodity markets, and to a certain extent real estate. Those fears seem well founded. During the last near Depression in 2008, world financial markets were brought to their knees by $150 Trillion of toxic debt in the form of credit default swaps, bad mortgages and cavalier lending. In the 8 years since 2008, not only have we not cleaned up that $150 Trillion dollars in toxic debt, we have doubled it to almost $280 Trillion dollars worldwide! The majority of the increase has been brought about by the world’s governments’ issuing of paper money in the hope of buying themselves out of a near financial depression. Murphy’s Law and a host of the top business minds in the world believe that it is not a matter of if, but when, the next financial crisis will occur.

Coincident with that, many people are re-evaluating their asset management strategies with an aim toward avoiding volatility wherever it exists!

Natural fancy colored diamonds are unique in that prices have never been subject to major volatility. Supply has always been restricted and there has never been a major credit component to their purchase and sale. For a comparative, we may have to go all the way back to pre-1974 when the gold standard was the system of choice to protect the world’s markets from volatility and excessive inflation. Colored diamonds have a history of holding their value and increasing on a regular basis. As more and more individuals look to a flight to quality there will be more upward pressure on colored diamond prices. Japan was the first country in the world to experience the low growth that is now common throughout the world. That started 26 years ago! There is nothing but the brightest of future for fancy colored diamonds and any other wealth accumulation vehicle that can hold off volatility and excessive credit.

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