Cut Diamonds Outpacing Gold Still "Grossly Undervalued"
Polished diamonds (beating gold this year) remain "grossly undervalued" relative to uncut gems and will extend gains on booming demand in India and China.
(EMAILWIRE.COM, December 21, 2011 ) New York, NY -- Cut Diamonds Outpacing Gold Still ‘Grossly Undervalued’:
Chart of the Day.
Polished diamonds (beating gold this year) remain “grossly undervalued” relative to uncut gems and will extend gains on booming demand in India and China, WWW International Diamond Consultants Ltd, said.
The CHART OF THE DAY shows polished gems trailing rough diamonds, which rose to an all-time high this year, according to data compiled by polishedprices.com, as supply from mine operators fails to keep up with Asian demand.
“Rough has just gone ballistic,” said Charles Wyndham, founder of WWW International and formerly a director at the sales operations of De Beers. “Polished diamonds are grossly undervalued. If the market is pushing rough skywards because of an anticipated shortage, at the very least the same should apply to polished diamonds.”
China recently surpassed Japan as the second-biggest buyer of diamonds, behind the U.S., which consumed 38 percent of production in 2010, according to De Beers. Demand in India grew 31 percent last year, while in China it jumped 25 percent and the U.S. market expanded 7 percent, it said in February.
While rough prices have advanced to a record this year, polished gems are still below their 1979 all-time high, according to polishedprices.com.
Rough prices may gain an annual 15 percent to 20 percent in the next two to three years, according to Namakwa Diamonds Ltd. (NAD) Chief Executive Officer Nico Kruger. “There is just no supply, so what else must the big cutters and polishers do? They must buy.”
GOLD’S UNPRECEDENTED RUN
With regard to Gold, in a September, 2011 research report, the mining team at TD Securities noted that the current rally in gold is 19 months old – making it the third-longest of gold’s 10 rallies in the past decade (gains of at least 15 per cent or more that preceded corrections of at least 10 per cent). While it has gone on much longer than the average rally (332 days, or roughly 11 months), it still has a ways to go to match the 24-month rally of 2004-06 or the 22-month rally of 2001-03. The rally has been long, but not unprecedented.
In terms of price gain, though, the rally is closer to pushing its historical limits. The 79-per-cent gain in bullion makes it the second-biggest rally of the past 10 years, trailing only the 91-percent gain booked in the 2004-06 surge. The average gain in the past decade’s 10 rallies was 46 per-cent.
WHY DIAMONDS MAY BE AN INVESTING GEM
Globe and Mail, September 7, 2011, David Parkinson
DIAMONDS APPEAR UNDERPRICED VERSUS GOLD AND SILVER
Can you name a precious commodity that hit record prices this summer? That has long been considered highly valuable for its remarkable beauty alone? In which demand is surging at the same time as mineable supplies are shrinking?
Yes, yes, there’s gold. But there’s a hidden gem that gets much less attention than gold, yet has put in a similarly spectacular performance over the past several months – and may well outperform gold in the next few years.
Diamonds.
Prices for both rough and polished diamonds are up more than 30 per cent in the past year, as new supplies seem unable to keep up with continued strong demand.
As with gold, diamond demand is largely driven by the jewellery business, but experts report that an increasing number of investors have been looking to diamonds as an alternative to gold as another safe shelter for their money, amid financial uncertainty and economic and currency instability.
“Diamond companies look underpriced versus gold, [platinum group metals] and silver stocks on a [price-to-net-present-value] basis,” wrote Edward Sterck, diamond-producer equity analyst for BMO Nesbitt Burns in London, in a recent research report.
Mr. Sterck predicted diamonds will continue to outperform gold as the gold rush moderates while continued demand growth and supply constraints drive diamonds higher. “The outlook for diamonds looks strong on a good old-fashioned supply-and-demand basis.”
“The prospect of a shortage of gem-quality rough diamonds has been the driving investment thesis in the diamond marketplace for some years,” said Des Kilalea, diamond analyst at RBC Dominion Securities in London, in a recent report.
Many major producers have responded to the strong market by dipping into their inventories – which has not only depleted diamond stockpiles, but also signals that producers are having trouble meeting demand solely through their mining operations. With the possible exception of Canada, existing diamond mines are becoming depleted, little new production has come on stream in the past decade, and the prospects for major new discoveries are considered slim.
“Rough diamond production peaked in 2006,” Mr. Sterck said. “Despite some returning production and a handful of new mines forecast to enter production … rough diamond supply is highly unlikely to ever return to its 2006 high water mark.”
Meanwhile, the rapid expansion of major emerging economies such as China and especially India – where diamonds have long been popular as an investment and currency alternative – is driving a surge of demand. Last year, diamond demand jumped 31 per cent in India and 25 per cent in China.
And despite a continued sluggish U.S. consumer economy, demand in the U.S. market jumped a surprising 7 per cent in 2010 – evidence of the growing popularity of diamonds as an investment.
“Longer term, the outlook is extremely positive,” Mr. Sterck said via e-mail. “The supply picture is extremely constrained, whilst demand is expected to grow strongly.”
IS IT TIME TO DEFLATE THE GOLD PRICE BUBBLE?
The New York Times, August 30, 2011, Steven M. Davidoff
The price of gold reached a record high of $1,917.90 an ounce last week, and then promptly plummeted by about $120 an ounce. The volatile trading is again prompting claims that gold is in a bubble, one that will pop violently.
The four-year surge in gold prices raises the same fundamental questions for market regulators as past booms in housing prices and Internet stocks. How should they react? Should they react at all? How do they even know if a bubble exists?
It is clear that speculation has been driving gold’s rise. People are buying gold as either a hedge against inflation or economic calamity or solely because they think the price will rise.
As evidence of this speculation, the World Gold Council reports that demand for gold bullion bars alone more than doubled from 2009 to 2010, to about 850 metric tons. This is largely gold that is bought and sits there as people wait for price increases.
This speculation is aided by the financial revolution. Previously, gold could be bought by retail investors only through dealers and street shops. Now anyone can go on the Internet, click and buy gold in the market through exchange traded funds or E.T.F.’s. These funds will buy gold on the investor’s behalf, and now hold about 2,250 metric tons of gold — or output for nearly a year.
Speculation alone does not necessarily mean that gold is experiencing a bubble. Gold is historically viewed as a protection against inflation and tumultuous economic times. The price increase can be explained by people’s betting rationally that those events will occur.
Robert J. Shiller of Yale University in his book “Irrational Exuberance,” tried to set forth a test for spotting bubbles. Bubbles are created when people buy into the next great thing. They accept that this is a game-changing asset — like housing or the Internet — that cannot fail. As more people buy the asset, the speculation and frenzy increase.
According to Professor Shiller, key drivers of a bubble now are the Internet and the news media. If you watch cable television, it would certainly look as if gold is in a bubble. Commercials abound for buying gold. Commentators on CNBC talk about gold’s hitting $2,400 an ounce.
In fairness, other CNBC commentators have said that this is foolish and that gold prices are too high. Still, the marketing of gold to the masses is an ominous sign.
Even after the downturn in prices last week, it is not clear whether gold has hit its peak. Is gold still being driven by fundamentals or is it a speculators’ delight?
Because of that uncertainty, regulators have acted as hesitantly as they did in the case of the Internet and housing bubbles. The Chicago Mercantile Exchange recently raised margin requirements - the amount of money an investor can borrow to buy a commodity – for gold. The Singapore exchange also raised margin requirements last week. As a result, speculators who purchased on margin sold to cover their positions and gold tumbled $120! Caution may well be the order of the day!
While no one would bet on a return to the stability of a Gold Standard happening soon, there is one other valuable hard asset that has never left the core fiscal principals of the Gold Standard! That hard asset is Natural Colored Diamonds!
The market for Natural Colored Diamonds is a throwback to times when true asset value was a requirement for credit creation and financial markets were not as easily susceptible to speculation and uncertainty. With few exceptions, Colored Diamonds are bought and sold with hard currency, not credit! Therefore, bank credit has never been a contributing factor leading to fire sales or sell offs of any kind. The Colored Diamond marketplace is remarkably stable – in fact Colored Diamonds have not gone down in value at the dealer level for more than 40 years! During that time, they have weathered the financial storm of 3 major recessionary periods including the current crisis. The best Colored Diamonds are currently bringing record prices at Sotheby’s and Christie’s Auction House sales! And during that same 40 year period, prices have doubled at the dealer level on average every 5 -7 years – an average return of over 10%!
From a Supply point of view, Colored Diamonds are an extremely valuable by-product of colorless diamond mining. There is no such thing as a Colored Diamond mine. In any given year, 88 million carats of rough diamonds mined worldwide will result in the production of less than 15,000 total carat weight of Colored Diamonds of all colors, in all sizes. Colored Diamonds of over 1 carat in size are incredibly rare – perhaps 1 in 10,000 carats for Yellow and Brown to 1 in 500,000 for Pink, Blue and Green.
While mined Supply has remained at or about the same level for many years, demand for Colored Diamonds has increased exponentially! This continues to put upward pressure on Colored Diamond prices. Another consideration is portability. Should the need arise, many purchasers in less stable countries take solace in the fact that they can move if they have to with literally a million dollars or more in their pocket! And while retail jewelry demand is the main price driver for Gold, exactly the opposite is true for Colored Diamonds. The greatest percentage of Colored Diamonds are purchased by Private Collectors and Investors - not Jewelers!
With all of the banter about a return to the Gold Standard, in the absence of political will, Natural Colored Diamonds have become a wealth accumulation and asset protection vehicle that, along with Gold should be a part of everyone’s portfolio recovery program!
Chart of the Day.
Polished diamonds (beating gold this year) remain “grossly undervalued” relative to uncut gems and will extend gains on booming demand in India and China, WWW International Diamond Consultants Ltd, said.
The CHART OF THE DAY shows polished gems trailing rough diamonds, which rose to an all-time high this year, according to data compiled by polishedprices.com, as supply from mine operators fails to keep up with Asian demand.
“Rough has just gone ballistic,” said Charles Wyndham, founder of WWW International and formerly a director at the sales operations of De Beers. “Polished diamonds are grossly undervalued. If the market is pushing rough skywards because of an anticipated shortage, at the very least the same should apply to polished diamonds.”
China recently surpassed Japan as the second-biggest buyer of diamonds, behind the U.S., which consumed 38 percent of production in 2010, according to De Beers. Demand in India grew 31 percent last year, while in China it jumped 25 percent and the U.S. market expanded 7 percent, it said in February.
While rough prices have advanced to a record this year, polished gems are still below their 1979 all-time high, according to polishedprices.com.
Rough prices may gain an annual 15 percent to 20 percent in the next two to three years, according to Namakwa Diamonds Ltd. (NAD) Chief Executive Officer Nico Kruger. “There is just no supply, so what else must the big cutters and polishers do? They must buy.”
GOLD’S UNPRECEDENTED RUN
With regard to Gold, in a September, 2011 research report, the mining team at TD Securities noted that the current rally in gold is 19 months old – making it the third-longest of gold’s 10 rallies in the past decade (gains of at least 15 per cent or more that preceded corrections of at least 10 per cent). While it has gone on much longer than the average rally (332 days, or roughly 11 months), it still has a ways to go to match the 24-month rally of 2004-06 or the 22-month rally of 2001-03. The rally has been long, but not unprecedented.
In terms of price gain, though, the rally is closer to pushing its historical limits. The 79-per-cent gain in bullion makes it the second-biggest rally of the past 10 years, trailing only the 91-percent gain booked in the 2004-06 surge. The average gain in the past decade’s 10 rallies was 46 per-cent.
WHY DIAMONDS MAY BE AN INVESTING GEM
Globe and Mail, September 7, 2011, David Parkinson
DIAMONDS APPEAR UNDERPRICED VERSUS GOLD AND SILVER
Can you name a precious commodity that hit record prices this summer? That has long been considered highly valuable for its remarkable beauty alone? In which demand is surging at the same time as mineable supplies are shrinking?
Yes, yes, there’s gold. But there’s a hidden gem that gets much less attention than gold, yet has put in a similarly spectacular performance over the past several months – and may well outperform gold in the next few years.
Diamonds.
Prices for both rough and polished diamonds are up more than 30 per cent in the past year, as new supplies seem unable to keep up with continued strong demand.
As with gold, diamond demand is largely driven by the jewellery business, but experts report that an increasing number of investors have been looking to diamonds as an alternative to gold as another safe shelter for their money, amid financial uncertainty and economic and currency instability.
“Diamond companies look underpriced versus gold, [platinum group metals] and silver stocks on a [price-to-net-present-value] basis,” wrote Edward Sterck, diamond-producer equity analyst for BMO Nesbitt Burns in London, in a recent research report.
Mr. Sterck predicted diamonds will continue to outperform gold as the gold rush moderates while continued demand growth and supply constraints drive diamonds higher. “The outlook for diamonds looks strong on a good old-fashioned supply-and-demand basis.”
“The prospect of a shortage of gem-quality rough diamonds has been the driving investment thesis in the diamond marketplace for some years,” said Des Kilalea, diamond analyst at RBC Dominion Securities in London, in a recent report.
Many major producers have responded to the strong market by dipping into their inventories – which has not only depleted diamond stockpiles, but also signals that producers are having trouble meeting demand solely through their mining operations. With the possible exception of Canada, existing diamond mines are becoming depleted, little new production has come on stream in the past decade, and the prospects for major new discoveries are considered slim.
“Rough diamond production peaked in 2006,” Mr. Sterck said. “Despite some returning production and a handful of new mines forecast to enter production … rough diamond supply is highly unlikely to ever return to its 2006 high water mark.”
Meanwhile, the rapid expansion of major emerging economies such as China and especially India – where diamonds have long been popular as an investment and currency alternative – is driving a surge of demand. Last year, diamond demand jumped 31 per cent in India and 25 per cent in China.
And despite a continued sluggish U.S. consumer economy, demand in the U.S. market jumped a surprising 7 per cent in 2010 – evidence of the growing popularity of diamonds as an investment.
“Longer term, the outlook is extremely positive,” Mr. Sterck said via e-mail. “The supply picture is extremely constrained, whilst demand is expected to grow strongly.”
IS IT TIME TO DEFLATE THE GOLD PRICE BUBBLE?
The New York Times, August 30, 2011, Steven M. Davidoff
The price of gold reached a record high of $1,917.90 an ounce last week, and then promptly plummeted by about $120 an ounce. The volatile trading is again prompting claims that gold is in a bubble, one that will pop violently.
The four-year surge in gold prices raises the same fundamental questions for market regulators as past booms in housing prices and Internet stocks. How should they react? Should they react at all? How do they even know if a bubble exists?
It is clear that speculation has been driving gold’s rise. People are buying gold as either a hedge against inflation or economic calamity or solely because they think the price will rise.
As evidence of this speculation, the World Gold Council reports that demand for gold bullion bars alone more than doubled from 2009 to 2010, to about 850 metric tons. This is largely gold that is bought and sits there as people wait for price increases.
This speculation is aided by the financial revolution. Previously, gold could be bought by retail investors only through dealers and street shops. Now anyone can go on the Internet, click and buy gold in the market through exchange traded funds or E.T.F.’s. These funds will buy gold on the investor’s behalf, and now hold about 2,250 metric tons of gold — or output for nearly a year.
Speculation alone does not necessarily mean that gold is experiencing a bubble. Gold is historically viewed as a protection against inflation and tumultuous economic times. The price increase can be explained by people’s betting rationally that those events will occur.
Robert J. Shiller of Yale University in his book “Irrational Exuberance,” tried to set forth a test for spotting bubbles. Bubbles are created when people buy into the next great thing. They accept that this is a game-changing asset — like housing or the Internet — that cannot fail. As more people buy the asset, the speculation and frenzy increase.
According to Professor Shiller, key drivers of a bubble now are the Internet and the news media. If you watch cable television, it would certainly look as if gold is in a bubble. Commercials abound for buying gold. Commentators on CNBC talk about gold’s hitting $2,400 an ounce.
In fairness, other CNBC commentators have said that this is foolish and that gold prices are too high. Still, the marketing of gold to the masses is an ominous sign.
Even after the downturn in prices last week, it is not clear whether gold has hit its peak. Is gold still being driven by fundamentals or is it a speculators’ delight?
Because of that uncertainty, regulators have acted as hesitantly as they did in the case of the Internet and housing bubbles. The Chicago Mercantile Exchange recently raised margin requirements - the amount of money an investor can borrow to buy a commodity – for gold. The Singapore exchange also raised margin requirements last week. As a result, speculators who purchased on margin sold to cover their positions and gold tumbled $120! Caution may well be the order of the day!
While no one would bet on a return to the stability of a Gold Standard happening soon, there is one other valuable hard asset that has never left the core fiscal principals of the Gold Standard! That hard asset is Natural Colored Diamonds!
The market for Natural Colored Diamonds is a throwback to times when true asset value was a requirement for credit creation and financial markets were not as easily susceptible to speculation and uncertainty. With few exceptions, Colored Diamonds are bought and sold with hard currency, not credit! Therefore, bank credit has never been a contributing factor leading to fire sales or sell offs of any kind. The Colored Diamond marketplace is remarkably stable – in fact Colored Diamonds have not gone down in value at the dealer level for more than 40 years! During that time, they have weathered the financial storm of 3 major recessionary periods including the current crisis. The best Colored Diamonds are currently bringing record prices at Sotheby’s and Christie’s Auction House sales! And during that same 40 year period, prices have doubled at the dealer level on average every 5 -7 years – an average return of over 10%!
From a Supply point of view, Colored Diamonds are an extremely valuable by-product of colorless diamond mining. There is no such thing as a Colored Diamond mine. In any given year, 88 million carats of rough diamonds mined worldwide will result in the production of less than 15,000 total carat weight of Colored Diamonds of all colors, in all sizes. Colored Diamonds of over 1 carat in size are incredibly rare – perhaps 1 in 10,000 carats for Yellow and Brown to 1 in 500,000 for Pink, Blue and Green.
While mined Supply has remained at or about the same level for many years, demand for Colored Diamonds has increased exponentially! This continues to put upward pressure on Colored Diamond prices. Another consideration is portability. Should the need arise, many purchasers in less stable countries take solace in the fact that they can move if they have to with literally a million dollars or more in their pocket! And while retail jewelry demand is the main price driver for Gold, exactly the opposite is true for Colored Diamonds. The greatest percentage of Colored Diamonds are purchased by Private Collectors and Investors - not Jewelers!
With all of the banter about a return to the Gold Standard, in the absence of political will, Natural Colored Diamonds have become a wealth accumulation and asset protection vehicle that, along with Gold should be a part of everyone’s portfolio recovery program!
Contact Information:
Mercantile Diamond Group Inc.
David Metcalfe
Tel: 416-679-1550
Email us
This is a press release. Press release distribution and press release services by EmailWire.Com: http://www.emailwire.com/us-press-release-distribution.php.
Mercantile Diamond Group Inc.
David Metcalfe
Tel: 416-679-1550
Email us
This is a press release. Press release distribution and press release services by EmailWire.Com: http://www.emailwire.com/us-press-release-distribution.php.
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