Diamonds: don't buy into the illusion

With a single diamond selling for over $35m recently, many analysts are bullish on the future for diamond miners. But high prices are based on an illusion, and investors should steer clear.

There was a fine picture in the newspapers this weekend of Johan Dippenaar of Petra Diamonds holding up a large diamond. A very large diamond it came in at over 500 carats (the average engagement ring is well under one carat). And, being entirely flawless, had just been sold to a Chinese buyer for $35.3m.

So did the buyer get a good deal? That's hard to say. The financial crisis hasn't been good to diamond prices. By mid 2008 the market for new diamonds had all but collapsed. Polished diamond prices fell by a third as retail sales just vanished (30% of US jewellery stores have shut down since the crisis kicked off) and rough diamond prices fell around double that.

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Merryn Somerset Webb

Merryn Somerset Webb started her career in Tokyo at public broadcaster NHK before becoming a Japanese equity broker at what was then Warburgs. She went on to work at SBC and UBS without moving from her desk in Kamiyacho (it was the age of mergers).

After five years in Japan she returned to work in the UK at Paribas. This soon became BNP Paribas. Again, no desk move was required. On leaving the City, Merryn helped The Week magazine with its City pages before becoming the launch editor of MoneyWeek in 2000 and taking on columns first in the Sunday Times and then in 2009 in the Financial Times

Twenty years on, MoneyWeek is the best-selling financial magazine in the UK. Merryn was its Editor in Chief until 2022. She is now a senior columnist at Bloomberg and host of the Merryn Talks Money podcast -  but still writes for Moneyweek monthly. 

Merryn is also is a non executive director of two investment trusts – BlackRock Throgmorton, and the Murray Income Investment Trust.