From the very start of the crisis, many people have already become used to buy gold as an investment, but this applies to bullions or coins in the first place, which are now difficult to get from banks due to pressing demand, the Interfax news agency says. A significant part of money is undoubtedly lost when you sell jewelry (as jewelry marketers explain, the price quoted at the exchange may be easily halved). In this respect jewelry graced with small diamonds is worse since it will be difficult to sell. However, there is more sense to invest into large stones, taking into account that the mark-up for certified polished diamonds is lower compared to the same gems in a jewelry piece. Diamonds of one carat and above may well be considered as investment stones. According to the Grace Group of Companies’ spokesman, it were big certified gems that lately pushed the demand upwards.
Foreign analysts expect a slump in prices for gems next year. The reason behind their pessimistic outlook, the Novye Izvestia daily says, is the increasing unemployment in the United States, the country, which accounts for one half of the world’s demand for polished diamonds. Currently, the unemployment rate in the Unites States hit its 14-year high reaching 6.5%.
Of course, this is not that all the Americans who remained jobless now were previously too busy buying jewelry. The major point is that consumer environment turned to the worse as a whole – an avalanche of problems makes people be more wary towards very expensive purchases. This is why experts are confident that luxury demand will be going down and diamonds will not be able to avoid a price landslide. Thus, analysts of RBC Capital Markets predict a 15% drop in prices for diamonds in 2009.
According to Halil Shehmametov, director of analytic department of a finance corporation, now there are fair reasons for bringing diamond value down. “However, I believe that due to controllability and non-transparency of pricing on this market no one should expect a sharp and long-term decrease in prices,” the expert said.
The Association of Russian Diamond Manufacturers confirmed to Novye Izvestia that currently the situation on the gem market is grave and it is difficult to forecast any further developments. At the same time, experts are confident that there will be no disastrous drop in prices for diamonds because their value has never experienced any drastic falls. Domestic jewelers also have no doubts that demand for “girls’ best friends” will hold on even in this adverse time. They are inspired by that the average cheque value grew 70-80% from $250-300 to $700-800 during the last 3-4 years.
Besides, Russian demand does not stand any comparison to American demand. Expert calculations prove that Russia exports 96-97% of its gem output, while the rest goes to the inner market where the price level remains previous. According to the most optimistic evaluations, domestic diamond buffs consume 10% of the world’s diamond output at most. This amounts to about $100 million a year in wholesale prices. Such an amount does not weigh much but at the same time it does not collapse inner prices. This is because the circle of these buffs is too narrow.
However, the efforts of a whole range of advertising companies were aimed exactly at diamond buyers in October-November. The same cannot be said about gold. One exception was probably Jewelry Holding Altyn, which promoted gold pendants in one of its advertising releases (incidentally, the company published a record number of its releases in the Moscow and Saint Petersburg issues of the Komsomolskaya Pravda – Altyn placed four different ads in this daily).
Russian sellers stress emotional values and investment attractiveness of diamonds. Thus, one of the urban jewelry networks is promoting itself in the Volgograd issue of the MK daily under the slogan “Diamond is the Best Enemy of Inflation.”
“Diamonds are purchased because this is an absolute gift, a way to transmit one’s feelings to the one it is given to. Diamond is also an adornment and an opportunity to underline one’s status and to some extent an investment. Large diamonds of at least one carat featuring high quality and good color properties appear the most reliable from the investment point of view,” says the release of OAO “Yuvelirtorg” (Kaliningrad). The company’s stores sell not only diamond jewelry, but also certified gems: “It’s not so simple to find a large diamond with investment-attractive properties since the offerings are limited. As a rule, even one-carat diamonds are sold only on a preliminarily placed order to say nothing of diamonds weighing ten or fifteen carats. And if this is a stone of exclusive color, red or green or orange… However, Kaliningrad inhabitants have a possibility to place such an order with OAO Yuvelirtorg’s jewelry stores – “Ruby,” “Jade,” “Onyx” or “Fianit” – and get such a gem together with a certificate of the Gemological Center of the Moscow State University, which permits not only to sell the stone without any problems, but in case of necessity to use the certificate as an instrument of pledge. The Gemological Center of the Moscow State University and the Center of Certification for Precious Stones have sufficient experience to enjoy authority among private collectors and people who prefer not to mention their names both in Russia and abroad.”
In Kemerovo, in the end of October there was opened the Yakut Diamond House belonging to EPL Diamond trading in jewelry and certified diamonds. As it is promised in the release published in the Kuznetsky Kray weekly, if you buy a diamond with a state certificate you may have a jewelry piece made to order. A large certified diamond, besides its aesthetic values, may be used as a reliable investment tool. It is evident that vogue for diamonds will never end and they will never lose their value in any economic or political turmoil as is often the case with paper money.
In the end of 2007, jewelry house Kristall Mechty entered into a partnership agreement with diamond-mining holding Nizhne-Lenskoye which opens the way for the clearest Yakut diamonds to the factory owned by the jewelry house (Yakutskiye Brillianty), which after cutting will be set into exclusive diamond jewelry pieces, reports the Moskovsky Komsomolets daily.
Currently, Kristall Mechty has put on display a collection of large diamonds of three to ten carats. Primary attention is given to the quality of stones – absolutely all rough diamonds are sorted out at the Gohran Agency of Russia. If diamonds are bought, the customer is given a special certificate pointing out its properties, which guarantee their exclusive quality – the date and the place of origin.
The decision to sell not only diamond jewelry, but also loose diamonds was taken by the management of the jewelry house taking into account that Kristall Mechty is more and more often visited by people interested not only in beautiful jewelry, but in good investments. There are many reasons for such investments: in the time of the world financial crisis diamond prices are the most stable thing which may be offered by the world market. Diamonds do not fear inflation, bankruptcy, wars, revolutions, and defaults; they are convertible all the world over; they are not tarnished by time and possess an unswerving price growing trend. This is why buying large diamonds you make investments which are a priori indemnified from circumstances beyond your control. Due to the world crisis, the jewelry house offers notably lower prices.
In the advertising release of Altyn there is not a single word about investment qualities of diamonds. The company stresses the design of its jewelry and its range of products. For men, Altyn’s gold hypermarkets offer a broad variety of stone rings in white gold encrusted with diamonds. The time when only a few people could afford such jewelry has long sunk into oblivion. Now they appear an almost everyday attribute of business people. The company offers a 50% discount within the frames of its action called “Diamond Price Fall Season.”
“Luxury is relevant as never before – at a reception ceremony and in everyday life. The problem of price is important, but currently style is on the front burner,” convincingly says Maxim Fishbein, general manager of the Gold Union Jewelry House, which supplies such jewelry brands as Gavello, Korloff, Boucheron to Saint Petersburg. In the opinion of marketers, the premium jewelry segment is active in crisis periods too, since diamonds are not only beautiful adornments, but also a good investment vehicle. “Demand for premium is preserved. So far there are no global changes felt due to the crisis. Demand is growing at the rate of about 10% per year,” says Sergey Bogomolov, Commercial Director of Yuvelirtorg.
Today luxury adepts and admirers are more and more often attracted by vivid designer-made things. According to Maxim Fishbein, fresh style combined with a famous brand in a jewelry item makes it a very good commodity on the market. Simultaneously, collections featuring classic lines are always of current interest. Diamonds remain outside of time.
