'Super rich' investors agree diamonds really are a collector's best friend

2010 saw diamond prices boom and World Records get smashed - but what will 2011 have in store?

You may have noticed that 2010 has been the year of the diamond. We've reported on the biggest jewellery sales of the year and diamonds have dominated the market, setting a World Record or two along the way.

Sotheby's recently broke the World Record for a diamond after a bidder paid $46 million for a rare pink in Geneva. And an anonymous buyer recently paid $20.5 million for a 14-carat diamond at Christie's in Hong Kong.

But according to some experts, unprecedented record prices for diamonds at international auction houses may be just the tip of the iceberg of a growing trend among the world's super rich to buy large diamonds as safe and high growth investments.

Brian Menell, former De Beers executive, and former partner of De Beers in the Venetia Mine (South Africa's largest diamond mine) recently co-founded a boutique advisory business to assist high-end collectors with the purchasing of important white or fancy coloured diamonds.

"Diamonds are not only a uniquely concentrated form of transportable value, but also have a very compelling investment outlook," says Menell. "Diamonds in general, and important white and fancy coloured stones in particular, are rare and getting rarer."

"Many of the world's large mines are old and production is flat or declining. New discoveries are few and getting fewer. At the same time demand, particularly in the big emerging markets, is increasing at a growing pace.

"There is no doubt in my mind that price appreciation of polished diamonds over the next 20 years will outpace that of the last 20 years by a factor of 3 or 4 times."

In May this year, we reported that some diamond categories had shown a 20% increase since the start of 2010. As buyers have acknowledged the sustainability of the price increases going forward, the competition for the rarest and finest examples has become far more aggressive.

"While present demand at the super top end of the market appears to be largely from Russia and the Gulf, Chinese and other Asian demand is growing fast," says Menell. "Perhaps the rich of Europe and the US are being left behind in the scramble for the world's great gems."

One thing is for certain; 2011 is set to feature some spectacular sales, and those who re-write the record books could be in for a busy year. It seems there has never been a better time to invest in diamonds, and as always we'll be the first to report on the markets as they develop next year.

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Images: Sotheby's