Diamonds are widely used as decorative jewelry, but now, the exchange traded fund industry seeks to commoditize diamonds and allow more people to efficiently price the precious gems and invest in them.

Considering the rising popularity of commodity ETFs, like the SPDR Gold Trust (NYSEArca: GLD), which has $68.9 billion in assets under management, fund providers are toying with the idea of launching diamond-backed ETFs to satiate the growing demand for alternative investment assets.

Fund providers, like GemShares and IndexIQ, are planning physically-backed diamond ETFs to help fill the investment void. [Diamond ETF Moves One Step Closer to Launching]

GemShares seeks to create a benchmark basket of diamonds based on similar cut, color, clarity and carat size. The IndexIQ Physical Diamond Trust would create a “fungible” basket of one carat diamonds divided into different subcategories.

In comparing diamonds to gold as an investment asset, both have high aesthetic value, are easy to transport and are limited natural resources, reports Bob Pisani for CNBC.

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