Fickle Markets Have Investors Favoring Diamonds & Gold

The following article is published courtesy of: Israeli Diamond Industry Blog

Author: Roe Kalb

The Dow Jones’ strong performance of late sparked a frenzy of favorable projections regarding continued economic growth, but many investors, who have grown weary of the stock market’s tumultuous nature, prefer placing their faith in products and commodities they can see, touch, feel and even wear – like diamonds, gems and gold.

Financial experts say the trend is similar to one seen in the 1970s, when poor market performance prompted a return to investments in tangibles goods.

During the last decade, stocks included in S&P 500 have had a negative annualized return of -1%, Prof. Brian Bruce, Director of the EnCap Investments & LCM Group Alternative Asset Management Center at Southern Methodist University’s Cox School of Business in Dallas, said, adding that such climate often sees people  look for alternatives investments.

“Anytime any particular market falls, people abandon it, which is of course always the wrong time to do it. … But what an excuse to buy jewelry,” he said.

Precious stones – which do not have tradable markets attached to them – fall into the same category as collecting coins, comic books and art. “There’s no market for them, so to speak.”
In London, Adrian Ash, head of research at BullionVault, an online platform for gold bullion trading and ownership, said more people are choosing to invest in physical gold: “It’s much simpler to understand a lump of gold or a stone or even real estate.”

In the five years since BullionVault launched, 17,000 clients worldwide have invested in some 19 tons of gold stored in huge, underground concrete bunkers. The steady increase in gold prices has nudged the value of the bullion to $705 million.

Nevertheless, some experts believe investing in gold, and diamond trade and other tangible assets is somewhat of a kneejerk reaction to strong market fluctuations – or in other words – more panic than smarts.

Market analysts suggest that anyone worried about inflation should stay away from long-term bonds and opt to invest in short-term bonds or Treasury Inflation-Protected Securities, rather than in diamonds and jewels.

Diamonds in particular have hundreds of permutations and combinations. Investing in diamonds requires immense trust in one’s diamond dealer, because it is virtually impossible to standardize something like art or a diamond.

Tobina Kahn, vice president at House of Kahn Estate Jewelers, said clients invest tens of thousands dollars, sometimes even millions,diamond and precious stone jewelry.  Many of the pieces that come to the Chicago store are purchased from residents who sell their estate jewelry at House of Kahn’s headquarters in Palm Beach, Florida, she said. Many investors, it seems, like that they can enjoy their investments, in ways that include wearing them.

If you are interesting, you can check out the Israel Diamond Portal for some more information about diamond suppliers.


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