Diamonds - 'the new gold' for rich investors?

The Singapore Diamond Investment Exchange has launched Diamond Bullion, a collection of investment grade precious stones which it hopes will rival gold as a safe-haven alternative to cash.

New standardised form of the stones allows for less subjective values and easier trading

Diamonds can at last be an investor's best friend, the Singapore Diamond Investment Exchange (SDIX) said yesterday, as it launched a new standardised form of the precious stones to rival gold ingots as a safe-haven alternative to cash.

The industry says diamonds are the world's most concentrated form of wealth, but investors have long viewed them as less useful as a store of value than gold because each stone is different, making its value subjective and trading difficult.SDIX chairman and founder Alain Vandenborre said technology has solved that problem and diamonds can now become "the new gold".

While bullion trades in standard weights and purities, diamonds vary according to cut, clarity, colour and carat, making them generally harder to buy and sell as an investment. To solve this, Singapore Diamond Mint is listing a product called Diamond Bullion, or sets of investment-grade polished gems, in denominations of about US$100,000 (S$136,000) and US$200,000, with higher and lower values possible in future.

The diamonds are stored in a credit card-size device containing a chip that allows immediate valuation based on exchange trading and instant authentication, which is crucial as synthetic diamonds have no resale value.

A mark on the Diamond Bullion developed by the International Institute of Diamond Grading and Research, which is part of Anglo American's De Beers Group, provides a further guarantee.

SDIX, launched last year, says it is the world's first and only electronic exchange for trading investment-grade diamonds. The bourse has dealt about US$165 million of the gemstones since starting in May last year.


The diamond industry says the precious stones are the world's most concentrated form of wealth, but investors have long viewed them as less useful as a
store of value than gold as they vary based on cut, clarity, colour and carat, making them harder to buy and sell as an investment. ST FILE PHOTO

The exchange plans to list other denominations in future, and the interest they attract could boost trading volumes and global prices, Mr Vandenborre said. The products are fungible and tradeable, with real-time pricing available from the exchange website or the mint's mobile app, the bourse said in a statement.

Still, diamonds are down more than 30 per cent from a 2011 high, data from PolishedPrices.com shows, as the Chinese market softens and young consumers spend more on smartphones and gadgets. Gold has lost a similar amount from its peak that year as stock markets climbed and the global economy recovered.

Diamond miners welcomed the Diamond Bullion.

"Anything that can bring transparency to the diamond price is a good thing," said Mr Karl Smithson, CEO of Stellar Diamonds, which has a diamond-mining project in Sierra Leone.

REUTERS, BLOOMBERG

A version of this article appeared in the print edition of The Straits Times on October 11, 2017, with the headline 'Diamonds - 'the new gold' for rich investors?'. Print Edition | Subscribe