Diamonds lose their sparkle for investors

Diamonds are no longer among investors’ best friends, says Chris Carter

With investors fleeing for safe haven assets, now is the time for gold to shine. Diamonds, on the other hand, have lost their sparkle. In March, when stocks were plumbing new depths in the coronavirus crisis, the price for a single diamond carat fell by 6.8%, according to the RapNet Diamond Index. But the woes facing the industry actually go beyond the current crisis. Over the year, the single-carat price is down by 13.1%. 

What’s going on? Well, for starters, Covid-19 has exacerbated an existing problem. “India, where 90% of the world’s rough diamonds by volume are cut and polished, is in lockdown,” says Rachel Millard in The Daily Telegraph. That has resulted in a 50% drop in diamond exports from this processing hub. “For an industry that depends on being able to dig jewels out of a mine from Canada to Angola, fly them to the trading hubs of Antwerp or Botswana, and sell them to wealthy, hopeful consumers from London to New York and Beijing, coronavirus has been a fiasco.” 

A sorry state of affairs

With shops shut and people losing their jobs in, say, the US, the world’s biggest consumer market for diamonds, but also in Europe, and China, where the market is growing, diamond prices can be expected to fall further – by 15% or more this year, Paul Zimnisky, an independent diamond analyst, tells Millard. De Beers cancelled its latest sale after witnessing a 28% year-on-year drop in sales, and it’s been a similar story for its rivals. 

But even before the coronavirus outbreak, the market had been in a sorry state owing to a glut, “coupled with declining marriage rates among millennials”, says Alexander Gladstone in The Wall Street Journal. London-listed Petra Diamonds, already crippled by debt, has also had scant recent success at its famous Cullinan diamond mine in South Africa. That, in itself, wouldn’t be so bad for diamond merchants. Scarcity in other markets leads to higher prices. But the diamond market has had to contend with “fakes”. 

In fact, artificial diamonds are not fakes – they have the same chemical and physical properties as their earth-born brethren. They are just “grown” in a lab. They are also cheaper to produce, free of any historical and ethical taint and, in theory, are potentially greener, notes Oliver Milman in The Guardian.  

In the pink

Colour, in the literal sense, is important for collectors, as coloured diamonds are among the most sought-after – and few more so than the pink diamonds from Rio Tinto’s Argyle mine in western Australia. “Most mines will be lucky to unearth one pink in the entire haul; at Argyle, it’s about one pink carat for every 1,000 carats mined,” says Mark Ellwood in the Robb Report. They are also “consistently of the highest caliber, with a strong, pure, intense shade”. But the mine, which gave the world around 90% of its pink diamonds, has given up all but its last 150 or so carats. It is set to close later this year. Demand has been rising, however. So coveted are Argyle pink diamonds that it’s been rumoured Rio Tinto could end up selling the Argyle name. 

The £20 note worth £7,500

The introduction of the new polymer £20 note, featuring artist JMW Turner, has set off another round of frantic wallet-checking for notes with prized serial numbers. One of the first to be printed, a £20 note with the number AA01 000010, sold for £7,500 – 375 times its face value, and around twice its £3,000 to £4,000 guide price – at a charity auction held by Spink, says George Nixon for This Is Money. 

The sale took place behind closed doors due to the spread of coronavirus. By tradition, the Queen is usually handed the first note, ending in 01, while the note ending in 10 tends to be the lowest-numbered note to be made available to the public, “even if it is [at] a premium price”. In 2016, the lowest-numbered publicly available new polymer £5 note, ending in 17, sold for £4,150. A year later, it was the turn of the new tens, featuring Jane Austen. On that occasion, a tenner with the serial number ending in 10 sold for £7,200 at auction, also with Spink. 

The second-most expensive £20 note at last week’s sale was not the 11, but the 20, which after a bidding war, sold for £3,200. Notes ending in eights tend to sell well at auction, because the number is associated with good luck in Chinese culture. They “are very popular among our clients” and “likely to be sold at a higher hammer price”, Spink tells This Is Money. The £20 note ending in 88 sold for £3,000 – above its £2,500 upper estimate.

Auctions

Going…

A letter written by nurse Florence Nightingale 121 years ago, addressed to “the Aylesbury Dairy Co.”, is to go up for sale as part of Derbyshire-based Hansons Auctioneers’ Spring Fine Art and Library Auction, currently postponed due to coronavirus. In the letter, dated 6 March 1899, Nightingale asks: “Would you be so very good as to send me at once 6 eggs, if possible, laid this morning (or less than 6 if laid this morning) with the dark brown shells, for a gentleman very ill indeed, who fancies them – and to supply me with the same every morning for the gentleman who likes your eggs, & takes hardly anything.” The letter, discovered in a box of old papers, is expected to sell for up to £600.

Gone…

A sale of 1,100 items of memorabilia that belonged to the late actress Doris Day (pictured) raised almost $3m with Julien’s Auctions. The California-based auction house had estimated the online sale to make between $300,000 and $600,000. Top-selling items included the classic 1930 Ford convertible that featured in the opening scene to Day’s 1980 talk show Doris Day’s Best Friends. It sold for $96,000. A Golden Globe award from 1962 fetched $25,600. A planter, decorated with brass elephants, that had been a gift from Day’s friend, actor Rock Hudson, as well as a 14-karat gold poodle, both went for $15,625 each. All of the proceeds from the sale went to the Doris Day Animal Foundation.

Recommended

Three strong Asian stocks trading at bargain prices
Share tips

Three strong Asian stocks trading at bargain prices

Professional investor Nitin Bajaj of the Fidelity Asian Values investment trust picks three stocks that dominate their industries, earn good returns o…
20 Sep 2021
Iris Apfel: an inspiration to young fashionistas
People

Iris Apfel: an inspiration to young fashionistas

Iris Apfel made her name as a high-society interior designer before a show at the New York Met turned her into a fashion influencer. At 100 years old,…
19 Sep 2021
Warsaw and Stockholm: the unexpected new threats to the City of London
UK stockmarkets

Warsaw and Stockholm: the unexpected new threats to the City of London

London has seen off challenges from Frankfurt and Paris, but two other booming financial centres are a bigger threat, says Matthew Lynn.
19 Sep 2021
The charts that matter: more pain for goldbugs
Economy

The charts that matter: more pain for goldbugs

Gold investors saw more disappointment this week as the yellow metal took a tumble. Here’s what’s happened to the charts that matter most to the globa…
18 Sep 2021

Most Popular

The times may be changing, but don’t change how you invest
Small cap stocks

The times may be changing, but don’t change how you invest

We are living in strange times. But the basics of investing remain the same: buy fairly-priced stocks that can provide an income. And there are few be…
13 Sep 2021
Two shipping funds to buy for steady income
Investment trusts

Two shipping funds to buy for steady income

Returns from owning ships are volatile, but these two investment trusts are trying to make the sector less risky.
7 Sep 2021
How to stop recurring subscriptions becoming a drain on your money
Personal finance

How to stop recurring subscriptions becoming a drain on your money

Tracking and pruning subscriptions isn’t as easy as it sounds. Here's how to take charge.
14 Sep 2021