Diamond buying may provide a safe haven from a volatile financial market

By Leia Michele Toovey- Exclusive to Diamond Investing News

Diamonds could very well represent the next safe haven for investors, much like gold and silver, as investors continue to flee the financial markets for more secure investments. 

According to Harry Winston’s Chief Executive Officer Robert Gannicott, safe haven diamond investment combined with the lack of new mines in the industry is bound to buoy diamond prices.  The diamond market has been influenced by the economic downturn, as sales of mid grade diamonds in the U.S. have dropped.  Analysts are optimistic about diamond demand, as wealth amasses in Russia, the Middle East, and Asia.  Recent marketing has been geared to these regions to compensate for shrinking sales in the U.S. and parts of Europe.

The price of top quality gems in the market has been increasing since early 2007; speculation that demand would outstrip supply has lifted the value of 3-carat diamonds fourfold. Harry Winston is aligning its business strategies with their speculation on where the market is headed, and plans to acquire or merge with another diamond producer within three years to ensure access to supplies of rough diamonds. Harry Winston and its Diavik  partner, Rio Tinto are also increasing spending on diamond exploration by 20 per cent on the lands they jointly control near the mine.

The Fifth Antwerp Diamond Conference will take place on November 17 and 18, 2008.This year’s conference is titled ‘Diamonds, A Symbol of Value.’ Considered by many to the most important event of its type in the diamond industry, the 2008 Antwerp Diamond Conference will specifically examine the element of value in the diamond brand. It will consider the subject from a broad perspective, examining the subjective value of the diamond bestowed upon it by symbol of the primary human values of love and commitment.

“There is the diamond’s basic value, determined largely by the cost of mining the gem and then producing the polished product. There is the perceived value, reliant on the regard in which the consumer holds the diamond. And then there are the underlying sets of values, all which have to be defended if the perceived value is to achieve its maximum potential”, explained Freddy J. Hanard, Chief Executive Officer of Antwerp World Diamond Centre.

Conference speakers will include David Brimson, General Manager, European strategy and Brand experience, Lexus, Richard Hytner, Deputy Chairman of Saatchi & Saatchi Worldwide, Philippe Pascal, CEO of LVMH Watch and Jewellery, Bernard Fornas, President and CEO of Cartier, Gareth Penny, Managing Director De Beers Group of Companies, and Sergey Vybornov, President of ALROSA

Unprecedented growth combined with a new found stability is driving a consumer boom in the in-so-far repressed Latin America.  With the substantial need to find new diamond deposits, mining companies are tapping Brazil and Paraguay for their diamond deposits, reactivating an industry that was overshadowed by the dominance of South Africa in the early 20th century. Between 1725 and 1860, when Brazil was a Portuguese colony, a diamond rush was experienced until the Portuguese crown declared a royal monopoly on all diamond mining in the country and levied heavy taxes on mining concessions.

When the easy to access shallow alluvial deposits were depleted, South African diamond mining came in the scene; Brazil became a backwoods consideration with only modest production for much of the 20th century. Paraguay is also seeing an pick up in diamond exploration interest. Diamonds were found in the northeastern region in the 1960s, and miners have begun to map the geology of the diamond bearing igneous rocks that run from the Brazilian Amazon into Paraguay. Venezuela and Guyana also have some diamond production, while exploration is under way in Uruguay.

In preparation for the proposed Latin diamond boom, Panama City plans to build a 50-storey building to house a tax-free diamond exchange. The latter will also house a gemological institute, laboratories, cutting and polishing rooms, and a trading hall. Panama has applied to join the Kimberley Process, a society initiative that aims to stop the flow of conflict diamonds. The exchange will be the first of this type in Latin America, and will channel production from mines to the trading floor to retail outlets.