Diamonds more than doubled gold’s returns for 2011, according to Pinnacle Diamonds.
“Historical price performance of polished diamonds since 1982 is strong relative to gold, yet in the last 10 years it has lagged behind gold and other commodities,” says Alex Fray, chief financial officer of DODAQ.
Martin Rapaport, who founded a popular gauge of diamond pricing, said recently that he was preparing to release a “few” products this year that would be available to retail investors, the NY Times reports.
In the early 1980s, Rapaport submitted a contract proposal to the New York Commodities Exchange for the creation of a futures market for diamonds, according to a 2007 MarketWatch story.
It was rejected, he said, because the “diamond industry didn’t want price transparency.”
‘Difficult to create’
Some advisors are already advising caution on a diamond ETF, even though it’s not clear whether such products will gain regulatory clearance.
“Stay away until you know exactly how it works, and can be sure it’s acting like you think it will,” said Ron Rowland at Capital Cities Asset Management, in the NY Times article. “It’s going to be a difficult market to create.”
If diamond ETFs are launched, the gems could be the new gold. Bullion prices have soared the past decade on turmoil in global financial markets, currency debasement inflation concerns. Gold ETFs have allowed any investor with a brokerage account to buy bullion without the need to insure, store or transport the metal. Hedge funds have also been big buyers of gold ETFs, although it’s difficult to quantify how much ETFs have contributed to the historic rally. [Gold ETF Investors Unfazed by Pullback]
“The allure of diamonds is that, like gold, they are easily authenticated and long lasting. But unlike gold, and oil, diamonds have not had much price volatility, in part because they have not been touched by large flows of speculative money, though that could change if the new efforts succeed,” the NY Times reports.
Gold holdings in global bullion-backed ETFs total about 2,400 metric tons, close to a record.