Did you buy the dip? | BNT Diamonds
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Did you buy the dip?

05 Oct 21

First things first: it is always a good time to buy high-quality natural diamonds and natural diamond jewelry as a store of value. But some moments are better than others.

Like blue-chip stocks, higher-end diamonds are a smart investment that have withstood the test of time, increasing in value steadily over the years and weathering the inevitable price fluctuations inherent to every market. And like smart investors in the equities markets, those in search of tangible assets who identify the conditions for a temporary downturn can also recognize an opportunity to acquire a fundamentally strong asset at a favorable price. The global pandemic created just such an opportunity.

The outbreak of the Covid-19 pandemic had a significant impact on the diamond industry, forced retailers to close their shops and obliged consumers to stay home and cancel their wedding plans. As a result, demand for diamonds – as well as for most goods and services – fell sharply.

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While most people reined in their spending in the face of great social uncertainty, exerting downward pressure on prices, smart investors saw a window of opportunity to give some extra shine to a luxury purchase. Knowing the resistance of diamond values to societal crises, we at BNT Diamonds advised our clients that this window would not stay open for long … and indeed, it closed quickly.

While it might seem counterintuitive to some, the market for diamonds came roaring back before the pandemic had even started to slow its spread. A cocktail of increasing wealth, pent-up demand and the lack of options for discretionary spending on items such as dining and travel led to a rally which has now been sustained over the past 14 months, with no signs of letting up before the holiday season is upon us.

As savvy investors know, price fluctuations are driven largely by consumer demand. Diamond investors – or their advisors – would also have taken note of the fact that, with consumer demand down, the price of rough diamonds sold by the miners also eased several percentage points during this period. Having fallen at the start of the pandemic, however, demand for diamonds is once again very high, with prices following its upward trend.

As the Natural Diamond Council recently confirmed, diamond jewelry sales from March to May 2021 were three times higher than during the same period in 2020 and 30% higher than pre-pandemic 2019 sales, as consumers sought to purchase items having value as well as meaning. "Diamond jewelry sales have seen record-breaking growth as we emerge from the pandemic," said David Kellie, CEO of Natural Diamond Council, in press release.

As a result, the various price indexes (tracking wholesale prices) such as IDEX and polishedprices, have also reported a 17% rise in the average price per carat over the past year, and this across all level of goods. When it comes to the highest segment of diamonds (the D/IF category), BNT’s analysis shows that prices have risen even higher, in the 25-30% range. This makes for a healthy return for investors who were heeding the market indicators.

In short, the rebound in demand for diamonds since the early days of the pandemic has been nothing less than remarkable, especially considering the scope of the dip at the onset of the crisis. All of which points to the incredible resilience of demand for natural diamonds, for items that represent security and lasting value, particularly in times of uncertainty. It also verifies the basic principle of investing: when prices fall, it’s time to buy.

The resiliency of the demand for natural diamonds is why BNT Diamonds has the confidence to advise our clients that it is always a good time to buy high-quality natural diamonds. And to remind them that some moments are better than others.

- Stefaan Mouradian & Steven Boelens, founders BAUNAT Group

With this article, BAUNAT strives to inform you thoroughly about investing in diamonds. No investment can be guaranteed to be without risk or fully according to your expectations. That is why we recommend to research the risks and aspects of investing in diamond properly to ensure that you make the right choice for your portfolio.