Flight to quality gives diamonds a boost

published 21 June 2012

Both rough and polished diamond prices are likely to fall by 5% in 2012, reckons Charles Stanley's Kieron Hodgson. But the long-term outlook remains encouraging. Supply looks tight, with no major finds in the last 20 years.

Demand for rough diamonds should steadily increase in the next few years, with the expansion of the middle classes in Asia a key driver. In a decade, the American share of the high-quality diamond market has fallen from 60% to 40%, says Glenn Turner, commercial director at Gem Diamonds.

Diamonds aren't just status symbols, however, says Mark Robinson in the Investors Chronicle. "Fear of inflation and a shortage of alternative financial products and investible markets have resulted in a rush for physical assets among China's middle classes." Asian demand has shown little sign of fading despite the global downturn. Given the solid structural story, a diamond stock or two may well be worth tucking away. Two worth researching are Gem Diamonds (GEMD) and Petra Diamonds (PDL).

Subscribe to MoneyWeek

Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Get 6 issues free

https://cdn.mos.cms.futurecdn.net/flexiimages/mw70aro6gl1676370748.jpg

Sign up to Money Morning

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

MoneyWeek is written by a team of experienced and award-winning journalists, plus expert columnists. As well as daily digital news and features, MoneyWeek also publishes a weekly magazine, covering investing and personal finance. From share tips, pensions, gold to practical investment tips - we provide a round-up to help you make money and keep it.