Just don’t do it. Don’t buy diamonds. Here’s why

Just don’t do it. Don’t buy diamonds, either shares of diamond miners and distributors OR as a personal “investment”. Simply don’t do it. Here’s why.

The above edited excerpts, and the copy below, are from an article* by Paulo Santos which was originally entitled Don’t Buy Diamonds and can be read in its entirety  HERE.

What’s In A Diamond?

A diamond is a particular arrangement of carbon atoms…Making different arrangements of carbon is “easy” so, under the right conditions, synthetic diamonds can be produced out of carbon…using methods like vapor deposition or high pressure, high temperature processes.

Just because they are synthetic, that doesn’t make them any less real – they’re as much “diamonds” as anything being mined from the Earth. They’re just the same carbon arrangements as always. The established market, however, frowns upon synthetic diamonds..but for their users and wearers, there is absolutely no difference.

Industrial Usage

Since synthetic diamonds are as real as the mined ones, and since industrial-grade synthetics are much cheaper, the presence of mined diamonds in industrial uses has collapsed to as low as just 2% of the market.

Jewelry

The only market where synthetics still haven’t destroyed natural diamonds has been jewelry, where the industry has been able to lay claim to subjective values and keep buyers in line. Also, some types of synthetic diamonds still carry a large cost to produce, including clear gems. However, the purity of synthetics, the fact that they’re as real as natural diamonds, and a penchant for value might well turn things around in due time.

Diamonds As An Investment

For the regular buyer, even without the threat of synthetics, diamonds are an incredibly bad investment.

Whereas if you have a jewel with gold content, or a gold bar, you can sell it at a small spread to its gold content, the same does not happen to diamonds. Small diamonds encrusted in a jewel are basically worthless. There’s no point in paying anything for them. Larger ones, instead of trading at a 5% or so discount to a transparent spot price, will trade at a massive 50%+ discount to a nebulous price – and that’s if you can get a bid. If you have any kind of diamond, try selling it (if you can find anyone to not just appraise it, but also give you a firm bid on it). You will be surprised.

Diamond History

…If you are at all interested in diamonds I strongly suggest you read: “Have You Ever Tried to Sell a Diamond?” which will give you a sense of how the diamond trade came to be; how diamonds gained in value; how they got you to think that if you didn’t give your loved one a diamond ring, you’re worthless. It will open your eyes.

Conclusion

There you have it. The diamond industry is facing a mortal threat from synthetic diamonds which are every bit as real as the natural ones and synthetic diamonds’ size, quality and diversity do nothing but increase, while their production costs are likely to decrease over time. This is thus a clear risk if you’re thinking about buying shares on diamond miners and distributors.

For individuals considering buying diamonds “as an investment” there are even graver consequences…Simply don’t do it. Don’t do it because of the spreads, because of the lack of liquidity (it might be difficult to get someone to give you a bid) and because of the synthetic menace (this sounds like Star Wars).

Just don’t do it. Don’t buy diamonds – except for your loved one. If, after boring her with all the details of what diamonds are and how synthetic ones are every bit as real as natural ones, she endures that, then you can marry her.

*http://seekingalpha.com/article/3285705-dont-buy-diamonds?ifp=0

Other Diamond-related Articles of Interest:

1. The World Of Colored Diamonds