Diamond Market Changes May Restore Gem’s Allure

While its fiery brilliance has sealed many an American betrothal, the diamond is about as popular with U.S. investors as its original form - coal.

As the diamond market approaches rocking changes, even those without wedding plans may consider an investment in the simple carbon compound.

The diamond industry has long been under the auspices of De Beers Centenary AG, which sells 80 percent of the world’s rough diamonds through its Central Selling Organization.

But De Beers’ grip on the diamond market could be loosened by diamonds mined from the Siberian permafrost in Russia.

That could open to U.S. investors a market for rough diamonds that Martin Rappaport, president of Rappaport Diamond Corp., values at between $6 billion and $7 billion a year.

If so, investors can take a page from the jewelers handbook when evaluating a diamond’s value and focus on the four ‘C’s‘ - cut, clarity, color and carat.

Cut determines the diamond’s brilliance. Each facet acts as a mirror that must be cut in exact geometric relation to the others. Clarity refers to the number of inclusions, with fewer creating the more brilliant diamond.

The less color in the diamond, the greater its rarity and value. Diamonds are color-graded, with the purest achieving a D rating. Carat weight is a standard measure of a diamond’s size.

The most popular sizes of diamonds bought in the U.S. range from one-third of a carat to three carats, averaging in price between $1,000 and $25,000.

But diamonds are no place to invest for those of little means or know-how.

Moreover, investors were burned in the 1970’s when the U.S. government deregulated interest rates, sending diamond prices down.

The biggest barrier may be price. A small investment might be $10,000, but it can go straight up to $1 million for a larger diamond. And without sophisticated expertise, taking the plunge is not impossible, but hard.