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SUPPLY
Diamonds may be forever but supplies are fading fast.
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Through the 1980's to the late 1990's there were roughly 60 significant and small scale active diamond mines around the globe. Today there are less than 30 with no new mines set to come into production for the foreseeable future. After two fruitless decades of very expensive exploration, mining companies are now scraping the bottom of their existing assets. As major mines are now past their peak production years, many are now converting their spent open pits into underground operations. Underground operations are vastly more expensive and their yields are significantly less than their above ground counterparts. Supply has thus been depleting at a rate of approximately 10% annually. This in itself has been one of the driving forces behind ever increasing prices.
For every 100,000 carats of rough diamonds mined only 30% may be deemed Gem or Investment grade, the remainder being considered industrial grade.
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For every 10,000 carats of white diamonds mined only 10 to 15 carats will be deemed Fancy diamonds of various colours.
DEMAND
Although diamond production continues to decline, the demand from countries with a growing middle class is rising fast. The international Fancy Coloured Diamond market has shifted dramatically over the last 15 years. Historically Europe was the main market for fancy coloured stones. The combination of "old money", royalty, a large upper class and strong knowledge of the market were the driving factors. Investors from Russia and other prominent European countries have continued to be a very strong force in Fancy Coloured Diamond auctions because they have a long standing history and unparalleled knowledge of the market.
THE CHINA EFFECT
In 2000, the whole of Asia made up 6% of global demand, by 2015 that number had increased to almost 20%. Over the same time period the North American market increased to roughly 15%. In 2004, the United States closed their last diamond mine and has no further production.
China's affluent middle class is projected to grow by 60% or 200 million over the next 6 years, bringing the total middle class numbers to roughly 500 million going forward. There is a different mindset in China's middle class that separates them form other countries. Value investing for the long term in hard physical assets and a voracious appetite for the "finest things" has put tremendous pressure on the coloured diamond market because of the strength of their buying power.
Chinese investors have been the top bidders at several of the latest Christie's and Sotheby's auctions from 2014 to 2018. As an example, in 2017 Chinese business man Joseph Lau purchased the 12.03ct "blue Moon" Diamond for $48 million dollars and re-named it the "Blue Moon of Josephine", for his 7year old daughter. That sale came just a day after he bid and won a 16.08ct rare pink diamond for just over $28 million dollars which he re-named "Sweet Josephine". It can be surmised that he loves his daughter very very much. Many other notable coloured diamonds have been sold to European and North American investors over the same time period. It is not uncommon for spectacular diamonds to remain within affluent families or Royalty for generations, once they hit the open auction market the prices set records and make news headlines across the globe.
social media &
the "bling" effect
The advent of social media has created a whole new set of circumstances in the Coloured diamond market. Years ago auction results would get posted days or even weeks after an auction closed. Today results are instantaneous and after every significant auction there is an increased demand for coloured diamonds.
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The" Bling Effect" refers specifically to starlets, musicians and other highly visible public figures who are photographed wearing some of the most impressive coloured diamonds. Coloured diamonds have increasingly become part of engagement ring settings as celebrities such as Carry Underwood, Adel, Blake Lively, Anna Kornakova, Jennifer Lopez, Heidi Klum and many others have been photographed wearing hundreds, if not millions of dollar engagement rings. And this is just to name very few.