By Allison Tait, ninemsn Money
February 2008

 

A simple half-carat or one-carat white diamond might be just the thing to make the girls in the office green with envy, but it doesn't cut the mustard at investment level. Diamond producer DeBeers may have managed to sell the world on its "two months salary" rule of thumb for engagement rings but to the connoisseur the best investment diamond is a natural fancy-coloured diamond.

 

In October 2007, a 6.04 emerald-cut blue diamond went under the hammer at a Sotheby's auction in Hong Kong. It sold for US$7.98 million, the most expensive gemstone per carat ever bought at auction. At US$1.32 million per carat, it beat the record of $926,000 per carat set by the Hancock Red diamond in New York 20 years ago.

 

In Australia, the pink diamonds produced at Rio Tinto's Argyle mine are so highly valued that the 40-60 best stones each year are put out to tender. "This is a very rare product," says Jean-Marc Lieberherr, General Manager, Rio Tinto Diamonds. "It takes a year to accumulate 50 to 60 stones out of the 600 million stones produced by Argyle each year. Each stone showcased at the tender is a very special prize." No matter what colour you choose, you can count on getting a much smaller diamond for your dollar than if you spent the same amount on a white diamond. A high quality half-carat pink diamond, for instance, will fetch in excess of $100,000, yet you can buy a fine white diamond of the same size for around $5000.

 

Yet in some cases, your investment in a coloured diamond can pay off handsomely. Pink diamonds, for example, are running out. Rio Tinto recently committed $1 billion to expanding the Argyle mine, shifting to more expensive underground mining, but even this has only extended its life until around 2018. After that, the supply of Argyle pinks will cease. Given that pinks already enjoy a high appreciation rate of around 20 percent a year, it has to be assumed that the sky may well be the limit once the Argyle mine closes!