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Gold Vs Diamonds

Bonds and stocks have been good investments over more extended periods historically. However, the current volatility in the market, looming recession and higher inflation rates have pushed investors to seek better and safer investment options that may not be affected by the turbulence of the world’s stock markets.

In such times as these, many investors switch from paper assets to hard physical, tangible assets.

While some investors choose gold and other precious metals, others may choose diamonds.

The big question is, “are diamonds or gold a better investment for the future” and which is likely to give the best return on your investment (ROI).

This article will explore the two options and allow you to draw your conclusions. We should tell you that the information in this article should not be considered financial advice. We are not financial advisors and are not licensed to offer any financial advice. We are a research firm, and we aim to provide detailed practical, quickly understood information and our personal opinions on financial markets.

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diamonds vs gold as an investment

Gold

Gold is a precious metal that is becoming rarer every day. It is estimated that 20% of the world's total gold supply is left to be mined, according to the US Geological Survey.

To put that in perspective, around 190,000 tonnes of gold have already been mined, and only 50,000 tonnes are left to be mined, although estimates from different sources vary. Some of the remaining 50,000 tonnes may not be economically viable to mine at the current price point, thus decreasing the amount of physical gold potentially available even further.

The rarity of gold, as mentioned above, has already driven mass recycling of gold and gold jewelry.  and is forcing the gold price ever higher. You only have to Google the term “buy gold” in any city, and you will likely find many gold dealers ready to buy your gold. When writing this article, we typed into Google “Buy Gold New York”, and we found 1,990,000,000 search results.

Typically gold is used in such jewlery items as

  • Engagement Ring

  • Wedding Rings

  • Watches

  • Bracelets

  • Other Types of Ring

  • Pendants

  • Earings

Diamonds

Diamond is a high-pressure carbon, said to be the hardest material on earth. The uses for diamonds mainly break down into two categories.

  1. Used in jewlery
  2. Used for industrial purposes

It is estimated that about 80% of the world’s diamond production is used for industrial purposes. These are known as “Bort”

The remaining 20% are used in the production of jewlery.

A new study by an interdisciplinary team of researchers used seismic technology (the same kind used to measure earthquakes) to estimate that quadrillion tons of diamonds lie deep below the Earth's surface. That's 1,000,000,000,000,000 or one thousand times more than one trillion. Source CNN.

Gold Versus Diamonds Rarity

Gold is significantly rarer than diamonds, according to Ulrich Faul, an Earth scientist and professor at the Massachusetts Institute of Technology.

He also said, “After all, carbon is one of the most abundant elements on Earth — especially in comparison to heavier metals like gold — and diamond is simply composed of carbon under immense pressure.” 

All the supporting data shows that gold is, in fact, a rare commodity than diamonds, and with high demand for gold, it looks like in the longer term, the price is only likely to go one way, and that is up.

Diamond Prices

The prices of diamonds do not fluctuate like gold because they are not pegged directly to the economy. The value of diamonds has historically risen over time. The nature of the diamond's price increase makes it an investment that looks reliable. However, diamonds and their prices are subject to other influences that make it very difficult to know their true worth.

When it comes to diamonds, there can be a vast difference between a diamond’s cost and its worth.

Larger carat weights stones will be exponentially more valuable than the same carat weight in smaller-sized stones.

Diamonds are graded, and a price assessment is based on the 4 c principles.  The things that make up the 4 c grading criteria are

  1. Cut
  2. Color
  3. Clarity
  4. Carat Weight

It takes a true diamond expert to value a diamond; a slight discoloration or flaw in a diamond can drastically reduce its value.

The diamond industry is fraught with fraud, which prevents many investors from entering this market. If you are considering investing in diamonds, you are always best to buy certified diamonds as this will reduce the risk of fraud.

A diamonds' price depends on the American Gem Society (AGS) and the Gemological Institute of America (GIA) certifications. If a diamond has been verified and certified by one or both organizations, you can be sure you are paying for a gemstone of the quality and size it says on its certificate. Moreover, you must be sure you buy from a trusted dealer.

One such trusted dealer listed the following as the prices of diamonds at the time of writing this article

  • The 0.50 carat GIA diamond- costs you between $1,100 – $7,680.
  • The 0.75 carat GIA diamond- costs you between the range of $1,810 – $8,890.
  • The 1.00 carat GIA diamond- costs you between the range of $1,910 – $15,640.
  • The 1.50 carat GIA diamond- costs you between the range of $2,980 – $22,330.
  • The 2.00 carat GIA diamond- costs you between the range of $4,020 – $42,180.
  • The 3.00 carat GIA diamond- costs you between the range of $6,180- $50,050.
  • The 4.00 carat GIA diamond- costs you in the range of $7,570 – $68,120.
  • The 5.00 carat GIA diamond- costs you between the range of $8,430 – $70,360.

The wide range in cost reflects that there is much more to valuing a diamond than purely the carat weight.

Which Is the Better Investment Gold or Diamonds?

Let’s try to make a direct comparison of a diamond investment versus a gold investment over the last five-year period.

investing in gold versus diamonds

The chart Above shows the cost of one troy ounce of pure gold in US dollars over the last 5 years.

five year diamond price chart

The chart above shows the five-year growth of 57-facet round cut diamonds (3 carats, D-J color and IF-SI2 clarity). Source of data IDEX DIAMOND INDEX.

As you can see when comparing the two charts side by side, gold has seen a more significant growth curve than this class of diamonds over the last five years.

When you choose to invest in assets like diamonds and precious metals, you must ask a fundamental question, “Will investing in gold versus diamonds give me a higher return over time”. You may also like to consider whether “is investing in gold versus diamonds less risky.”

The truth is that both gold and diamond values are dependent on a variety of things.

Investing in gold or diamonds does not guarantee you will make a profit, as with all investments, the value of either item could go down or up.

However, we have seen that in the last two decades, gold demand has increased.

The rarity of products will always influence their prices; gold and diamonds are relatively rare products. However, gold's price is also influenced by its high demands. It means buying and selling gold will be easier than buying and selling diamonds.

You must also consider liquidity; will someone want to buy your gold or diamonds when you want to sell them? Selling gold is easy. There are many buyers in the marketplace, and a daily spot price is published for gold sales; we believe you will always be able to sell your gold quickly and easily.

When selling diamonds, diamonds are subject to manual appraisal and individual opinions. The value of individual stones can vary greatly. Investing in diamonds also comes with the associated additional costs of such appraisals at the time of purchase and at the time of sale. It is much more complicated and is likely to take you much longer to sell any diamond holdings you have, compared to selling any gold holdings you have. There are also far fewer diamond purchasers around than gold purchasers.

 

Investing In Gold or Diamonds for Your Retirement

You can hold eligible gold and other precious metals within a specialist Precious Metals or Gold IRA account. By purchasing your gold in a Gold IRA, you will get certain tax advantages; for example, any money spent purchasing IRA-eligible gold or other eligible precious metals can come from pre-taxed earnings. You will only be taxed when the assets are sold, and you withdraw the money from your Gold IRA.

Diamonds currently do not have the same tax status and are not eligible assets with a traditional IRA.

Conclusion - Gold or Diamond, Which Is Better for Investment?

During this article, we have concluded that

  • Gold is rarer than diamonds
  • Our two sample charts over five years saw gold rise in value much more than the diamond option we listed.
  • Gold is more easily certified, and there is less fraud in the gold industry than in the diamond industry
  • Gold has much more liquidity than diamonds, and gold can be sold far easier than diamonds
  • Gold can also be purchased within a tax-efficient Gold Independent Retirement account (a gold IRA).

It is, therefore, our conclusion that gold may well be a better investment vehicle than investing in diamonds.

If you are considering investing in gold or other precious metals, We at Bear Lake Gold have evaluated many gold brokers, dealers and IRA specialists. On an annual basis, we rate the key players in this marketplace. Our full reviews can be found here Gold Dealer Evaluations. However, to summarize, here are the details of our top three recommended gold and precious metal specialist companies.

 

Our #1 Precious Metals & Gold IRA Company - Best Overall

Augusta Precious Metals is our best rated overall precious metals company

  • Customer care is exceptional
  • Pricing is highly competitive
  • Educational program second to none
  • The best FREE investment guide in the industry
  • Zero complaints on BBB & BCA
  • Free shipping on all orders

Our #2 Recommendation - Best For Promotions

Goldco is our second top rated gold and precious metal company. Having been top rated all of last year they were very close top Augusta Precious metals

  • Great promotional offers
  • Pricing is highly competitive
  • Educational program second to none
  • FREE investment guide in the industry
  • High buyback prices
  • Expert guidance provided by the team
  • First years fees waivered for new customers
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Our #3 Gold & Silver Company -Great Prices and Great Customer Service

American Hartford Gold is our third top rated company.

  • A leading, recognized and trusted brand in the industry
  • A family owned and run business
  • Excellent customer service
  • Buy back guarantee
  • Free shipping
  • Promotional offers for new  customers
  • Transparent about cost
  • Diligent when it comes to compliance

 

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