Diamonds Are Now Rich investor's Best Friend

Rapaport estimates, “the supply of these precious gems will probably increase 2 percent to 3 percent per year over the next decade, versus demand of about 7 percent per year.” he added that, “the overall view is that prices will go up because of buying in markets such as India and China, where new wealth is emerging, although demand in those countries has been waning with the softening economies.”

Edahn Golan, an analyst specializing in the diamond industry said, “The reality of buying and selling diamonds, however, is not dictated simply by the principles of supply and demand. It's not like the average investor can go out and purchase a diamond and expect to sell it for a profit. You have to have what's called an 'early hand,'" he says. "Every time a diamond changes hands among dealers, there's a markup in price. If you buy from a polisher, it's considered firsthand. Many collectors already know who is an early hand trader."

Price transparency, quality assurance, transaction costs and liquidity are the three most important principles to follow before investing in diamonds. Moreover before buying them, the investor must identify how each of these affects their purchase.

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