Editor’s Note
This article explores the high-stakes world of diamond investment, a path some take as an alternative to traditional assets. It offers a glimpse into the heavily secured nerve center of the trade in Antwerp, Belgium.
In times of low interest rates and strong stock market fluctuations, investors are looking for ways to invest their money. Gold is the classic choice, but some brave souls also try diamonds. However, many pitfalls lurk.
The heart of the European diamond trade beats in Antwerp, Belgium. The Antwerp World Diamond Centre, or AWDC for short, is secured like a fortress.
The street is blocked with barriers, cameras follow pedestrians every step of the way, and upon entry, visitors must surrender their ID.
The reason is simple:
says Karen Rentmeesters, spokesperson for the diamond center. Initially, these are rough diamonds that traders purchase, often send out again for polishing, and which finally pass through the trading center again as cut diamonds.
Similar to gold, diamonds become interesting for investors when stock markets are going downhill. A comparison of the so-called Rapaport Index for round-cut, one-carat diamonds shows a significant price increase in 2008 and 2011, when the global stock market benchmark Dow Jones and the German benchmark DAX plummeted – once due to the financial crisis, once due to concerns about sovereign debt in Europe and the USA. After the recent stock market slump in early February, the diamond index has also risen slightly again.
Diamond prices are much more stable than the fluctuating value of gold.
says Jörg Lindemann, managing director of the Diamond and Precious Stone Exchange in Idar-Oberstein, Rhineland-Palatinate. In recent years, he has observed increased interest in diamonds. However, the industry expert warns:
Unlike gold, where the price is simply calculated based on weight, the value of a diamond is determined by four characteristics, the four C’s: Carat for weight, Clarity, Colour, and Cut. Every diamond is unique and therefore difficult to compare.
The trade is overseen by the Kimberley Process, a certification system for the origin of rough diamonds. It is intended to prevent diamonds from being used to finance wars and conflicts. However, Michael Gibb from the non-governmental organization Global Witness criticizes that the system does not work reliably.
Exploitation, money laundering, tax evasion, and environmental pollution could not be prevented in this way.
Diamonds do not necessarily have to come from mines – they have been grown in laboratories since the 1950s. In March 2017, physicist Matthias Schreck from the University of Augsburg and his team succeeded in producing a 155-carat diamond with a 92-millimeter diameter – one of the largest man-made diamonds to date. However, Schreck explains that such diamonds are less intended for investors and enthusiasts but are needed by industry, for example for high-performance electronics.
Artificial diamonds have the same properties as natural diamonds but are on average 25 percent cheaper. The difference can only be determined in a laboratory. The authenticity of diamonds is certified by institutions such as the Hoge Raad voor Diamant (HRD) or the Gemological Institute of America (GIA).
But a major problem remains: How can an investor put their money into diamonds without inspecting and buying the stones on-site? The Singapore Diamond Investment Exchange claims to be the world’s first platform to enable electronic trading of diamonds. It relies on standardized diamonds. But in the end, that too is a matter of trust.
(Author: Elena Metz, dpa)