Dubai: The business of diamonds is taking a few lessons from gold… and cryptoassets.
For what is supposed to be the first time, investors can pick up diamond ‘coins’ set at a fixed value of $5,000. For now, these are meant for institutional buyers and jewellers, but could be offered to retail investors as well. The diamond coins are issued by Diamond Standard Co. and made in New York. An estimated $25 million worth of these coins will be issued in the first draft.
Only natural diamonds will be used. These coins can be bought and sold online, and without the need for physical handovers. This is where the new diamond coins will mirror what’s going on with Bitcoin and other altcoin trades.
The set value and the limited number of coin issues could push traded prices higher, much in the same way in the gold and digital currency markets.
“There’s a need to create buying in diamonds other than for emotional/jewellery purposes,” said Shaunak Shastree, General Manager of International Gemological Institute (IGI), which is certifying these coins. Thus, these are the first certified ‘diamond commodity’. “When crypto currencies are being issued seemingly every day, there was a need to create options for investors with a ‘natural’ asset.
“The diamond coins were the outcome.”
"But there's been recent pick up, with gains in the 3.5 per cent range in the last three months," said Shaunak Shastree of IGI. "It's also a good time to push the new diamond coins - there hasn't been any new diamond mines and some of the older ones have long since run out.
"With supply of fresh stones tapering, there's a chance for real investor support to build up in the market."
It will need a deep change in mindset about diamonds, especially in the investor community. For that, diamonds needs to develop a base to what gold commands. The yellow metal has been exceptionally popular with consumers and investment funds in recent years, and in fact, the latest round of gains for gold has been driven by funds buying up. Gold’s again gone past the $1,900 an ounce, making it even more difficult for jewelry shoppers.
“For investors in these diamond coins, investors have a physical asset backing it – that’s definitely not the case with Bitcoin or any of these fancy assets,” said Shastree. “Those crypto assets are backed… by nothing.
“It’s something new that’s being tried. Diamond purchases have always been associated with an emotional decision, or high-value one-off stones. The new coins make it more of a steady investor-focussed asset class.”
It will also help Diamond Standard that a broader base of buyers are showing up for diamonds. Just over three decades ago, US buying of these precious stones accounted for 70-80 per cent of the overall; it’s now dropped to 40 per cent as the likes of China and India weigh in.
“Even with gold, it’s only in these last 10-15 years that prices have consistently traded higher,” the IGI official added. “This is a chance for diamonds to give investors a few more options on the assets they want to pick up.”