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A Lesson In Supply and Dia-mand
Published By: troy 12/10/2016
Posted In: Investments
A Few Lessons In Supply and Dia-mand
Looks like the suit and tie crowd are finally catching on about diamonds being forever – or at least figuring out that applies to the market too!
Luckily, safe economics is all about knowing the market, and nobody knows the diamond jewellery Sydney market like Troy. ( That’d be me, by the way).
So let me explain:
In a decade that’s seen the world shaken by the crumbling of markets the bankers all told us were fool proof, the smart investor has grown a little weary of liquid stocks and complicated, multi-national investments that you can’t touch without three plane tickets and a bodyguard. They’re shaky, they’re unreliable, and more often than not, people don’t even understand where their money is going!
People are finding that a market they can see and understand is a much greater promise of safety and stability for their money.
It’s the same reason people buy great works of art, they only grow more valuable with time without the volatility of stocks or property.
To put it simply, diamonds are a commodity that are only going to keep or increase their value while being practically indestructible and easy to store.
Makes you want to go out and buy some diamonds, doesn’t it?
Now anyone with a fundamental understanding of finance can point out an issue here; sure, diamonds may keep their value, but aren’t investments meant to grow in value? As in, aren’t you supposed to be able to sell your diamond for a lot more than you bought it for ten years ago – after all that’s what separates a product from an investment.
Yes, they are. And they do – if you know how to buy the right diamonds.
The cornerstone of any product economy is scarcity, it’s what determines everything from standard rates to market elasticity. It’s basic supply and demand. If you have a product that more people demand than there is active supply for, those people will pay a higher price for it.
It’s like if you had a bag of skittles with an evenly distributed combination of colours – except for pink. There’s only one pink skittle. Because the other skittles are more common, you can sell that pink skittle to someone on the schoolyard for more than you can the others, because the item is scarce. Now imagine that the company stopped producing pink skittles altogether. Suddenly those last few pink skittles? Very valuable.
Now replace ‘skittles’ with ‘diamonds’ and you’ve got a very realistic outlook of how the market is developing in Australia.
As we’ve talked about in the past (link here), the pink diamond is getting rarer, and the price is reflecting that. Because of its scarcity, the average price of a top quality 1 carat pink diamond has now reached $1.3 million dollars. The same quality 1 carat white diamond? $35,000.
The Argyle mine in Western Australia is closing in 7 years as it will have exhausted its supply of pink diamonds, and when it does, the price is going to reflect the sudden drop in supply. The smart investors are buying them up now to reap the rewards later. It’s about anticipating the value of a diamond later, not today.
At Troy Clancy Jewellery, we help you make smart investments in beautiful products so you get a great two in one deal. Something that you can show off on your finger today, and something you can show off on your bank account later. If you’re looking into using the diamond market to invest, reach out to us, we’ll source those stones and make sure this opportunity is as golden as it could be for you.