Are diamonds an alternative to gold?

Due to a stable global demand, the price for diamonds is expected to increase significantly, according to Antje Krey, managing director of Pretagus GmbH. The time to invest in diamonds is currently favorable, however, it must be done carefully, as only the right diamonds are a good investment and can be a worthwhile alternative to gold.

This article is also available in German.

“Diamonds are becoming more scarce and increasingly expensive to procure,” says Antje Krey. As with gold, shortages indicate a rise in long-term prices. Considering this, coupled with a stable global demand and even growing demand in emerging markets, investment in diamonds is an attractive option.

Antje Krey Pretagus GmbH
Antje Krey

Diamonds would have similar investment advantages to gold, Antje Krey tells SCOREDEX: “People have it. People know that they have it.” That’s how it is at Pretagus GmbH, where Krey conducts business. There, diamonds are the property of every customer.

Most customers leave the selection of diamonds to Pretagus GmbH. Some customers, however, have exact ideas and images of which diamonds they would like to acquire. Antje Krey says:

“If a sum larger than 100,000 EUR is to be invested, we discuss this first with the customer, and then invest the sum in several stones instead of just one single stone. If the customer would like to acquire a single stone for 100,000 EUR and also understands what comes along with this, then we of course all them to do this.”

Certificates of renowned laboratories

Most importantly, a reputable laboratory always certifies the diamond investment acquired. Even if different diamonds all weigh one carat, they have different dimensions and therefore a certificate is required to document these properties exactly.

According to Krey, the value order for the investment can then be made based on the certificate. While there are hundreds of labs that work with diamonds, it is especially important to investors who rely on diamonds of the future that these stones have internationally approved certificates.

Internationally approved certificates are the GIA (Gemological Institutes of America), HRD (Hoge Raad voor Diamond) and IGI (International Gemological Institute).

In addition, Pretagus GmbH pays careful attention in which diamonds to acquire, “they must have very nice proportions and beautiful sparkle,” says Krey. With these good qualities, you can also expect the best performance. “Good qualities are not only found in color and purity, but also in the high glitter power of the diamonds.”

Professional quality control is necessary

“Another important point is that one receives the stone as it is described exactly in the certificate,” says Krey. In many cases, investors are not diamond experts, which is where Pretagus GmbH sees their job. For each diamond that a client purchases, a professional quality control must be conducted.

Foto: PretagusPretagus GmbH preserves the acquired diamonds for clients on request in a duty-free warehouse. This allows the diamonds to be bought legally without paying value added tax (VAT), which is 19% at retail or online stores.

Furthermore, Pretagus can resell and deliver the stones from the duty-free camp very quickly, “for example, within three days to India” according to Krey. Also, the customers don’t have the burden of safe storage of the diamonds. “If you buy only one stone, you quickly have a value of 20,000 EUR.”

Pretagus offers clients the option for a repurchase offer for the diamonds. “We make an offer in the case of doubt, not only for the customer, but also this is why we are so critical in the first place. As we make an offer in the case of doubt the stone not only has to appeal to the customer from the beginning, but also to us,” Krey says. For the price composition, the market price at the time of selling is relevant.

“It’s like gold, but with some major differences. With gold, there is a gold course, accessible to everyone. Gold is always gold, whether an ounce or one kilogram or one coin”.

“Diamonds, on the other hand, are all unique, so pricing is different. There are prices for various grades and qualities, presented in the Rapaport price list and updated regularly as a reference. It is then traded in the percentage of the Rapaport”.

The Rapaport list also includes references prices for different qualities, color, clarity and weight classes. The Rapaport Price List is aimed at traders and Pretagus negotiates with suppliers as a percentage of the Rapaport. Depending on the quality and availability of the stone, the percentage is higher or lower.

Antje Krey carries a diamond herself

In reference to the fall in prices of precious metals and diamonds in recent times Antje Krey says: “One must tie together and investment in precious metals and diamonds in a suitable time horizon”. Over the term of the investment in the past it has always paid off:

“In a flawless one-carat with the best color, the value increases by 54% in the ten year period of March 2004 to January 2015, for example. With a one-carat with E color development, it was as high as 60%.”

Antje Krey carries a one-carat ring herself, 6.5 millimeters in diameter. “The ring is often moved from hand to hand and is admired,” she says. This way, customers can get an idea of the size of one-carat stones. “I enjoy it very much.”

(Pictures: Pretagus)