However, unlike gold, diamonds are not homogenous – they come in color, clarity, cut and carat size have diminished value based on size and do not trade in a spot market.
If diamonds were commoditized, the market would make diamond pricing more transparent, and it would bring in more investors as the investment class provides another hedge against inflation.
Currently, people like Martin Rapaport of the Rapaport Price List have helped promote greater transparency in diamond pricing. Rapaport plans to create a type of diamond depositary receipt to help investors buy and sell diamonds as a security without taking physical delivery.
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Max Chen contributed to this article.