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A diamond as a valid investment by Don Rev
As many other gemstones, diamonds are very attractive minerals, which â once cut and polished â have been used as jewelry and other types of decoration. More importantly, diamonds have been hoarded as gemstones since the ancient times, but their popularity dramatically increased since the 19th century in spite of their oversupply. Why did it happen? And above all, why are they a safe form of investment, in spite of their lack of fungibility? The reason is simple and stems from history.
Diamonds were in the past pure, rare and incredibly attractive. But then in the 1870s mines were discovered in South Africa and traders started to fear a decline in values due to oversupply. It is for this reason that they became increasingly embedded into a clever scheme that sustains their value against risk and uncertainty.
How does it work? Simply as it is, all the production is monopolized. This means that all the diamond mines in the world are in the hands of the same or few producers. Second, there are also very few cutters and they are subject to strict control, so that it is possible to perfectly tune the supply and demand. Finally, the marketing for diamonds is one of the most successful world campaign ever organized. They really are aesthetically amazing!
Overall, this mechanism is so complex that requires a perfect apparatus working constantly to make diamonds a profitable investment. As the American journalist E. J. Epstein argued, âthese included a huge stockpile of uncut diamonds in a vault in London; a billion-dollar cash hoard deposited in banks in Europe; and private intelligence network operating out of Antwerp, Tel Aviv, Johannesburg and London; a global network of advertising agencies, brokers and distributors; corporate fronts in Africa for concealing massive diamond purchases; and private treaties with nations establishing quotas for annual productionâ.
The result of this cartel is so astonishing that, whilst other commodities fluctuated wildly in secular terms, diamonds continued to advance upward in price year by year.
So, a diamond might lack liquidity, but it certainly represents an important form of investment. Diamond market is so calm against the economic uncertainties that everybody assumes the value of these gems to increase forever.
What are you waiting for? Diamonds are a safe investment!
The author has been working in bespoke jewellery, bespoke engagement rings and conflict free diamonds for a very long time.
Article Source: http://www.earticlesonline.com/Article/A-diamond-as-a-valid-investment/604459
