Investors typically invest in these types of projects for three reasons: As a hedge against international market risk, as a safe haven or as a direct investment.
Investment in Diamonds
The popularity of diamonds has steadily risen since the 19th century as a result of successful marketing strategies.
Approximately 20% of mined diamonds are used in jewelry and 80% for industrial uses (such as lasers, drill parts and
On August 7, 2012, the USPTO granted a patent on a process that classifies Investment Grade Diamonds for commercial trading and financial investments, the precursor for diamonds being a publicly traded asset class. As a result, a Physically Backed Diamond ETF is currently under US Securities and Exchange Commission Registration and is anticipated to be available on the NASDAQ Stock Market by 2014.
The non-linear, exponential pricing of different sizes (weights) of diamonds means that it is not realistic to exchange, for example, two quarter-carats (50 mg) for one half-carat (100 mg). With commodities such as gold, it is clear that one twenty gram bar is worth the same as two ten gram bars, assuming the same quality. In most terminal markets, there needs to be a readily available standard quality, or limited number of qualities, available in sufficient quantity to be tradeable.
This is a major factor which affects liquidity and the large number of variables in diamond quality makes commodity-like pricing difficult, especially with rarer stones that merit special handling above standard-issue diamonds.
There are also fashion and marketing elements to take into consideration. De Beers expends marketing efforts to encourage sales of diamond sizes and qualities which are being produced in relatively large quantities. They have also been known to take steps to discourage investment, primarily because they perceive that bubble prices which are followed by sharp falls are bad for long term consumer confidence in diamonds as a long-term store of value.
The investment parameter of diamonds is their high value per unit weight, which makes them easy to store and transport. A high quality diamond weighing as little as 2 or 3 grams could be worth as much as 100 kilos of gold. This extremely condensed value and portability does bestow diamonds as a form of emergency funding. People and populations displaced by war or extreme upheaval have utilized this portable asset successfully. In 2009 an exchange was launched by DODAQ to trade categories of polished diamonds. The DODAQ exchange is intended to be a terminal market for round polished certified diamonds (which is the most liquid part of the market) and hosts its centralized storage facility in a Freezone. The exchange is an attempt to overcome the traditional investment barriers of sales tax and low liquidity on the resale market.
In 2012 DODAQ nv and the Antwerp World Diamond Centre joined forces to create DIAMDAX. It is the first online diamond exchange to report the actual transaction price. The exchange provides its users with a fully automated trading platforms and acts as counter party to both buyer and seller, offering anonymity to its users.
Rare "Fancy Colored Diamonds" such as Yellow, Pinks, Blues and Greens have proven to be a secure investment over the past five years. This is based on the principles of supply and demand, as well as new economies entering the market. Rio Tinto has announced that they intend to close the Argyle Mine in Western Australia in 2016-2018 which will impact the dwindling supply.
In July 2007, Diapason Commodities Management delayed listing a new investment company called Diamond Circle Capital, which aimed to invest in large polished diamonds worth more than $1 million each. As of 2008, the fund offering was postponed until further notice.
In June 2012, Finanz Konzept AG launched the worldwide first actively managed physical diamond fund, which invests in natural physical polished diamonds and coloured diamonds.
In November 2012, PureFunds launched an Exchange Traded Fund listed on the New York Stock Exchange that invests in companies engaged in the diamond industry, rather than invest in physical diamonds.
And according to Bain & Company, the search for diamonds will increase, while production will remain stable with major producers like De Beers, BHP Billiton and Alrosa. See the chart below:
Macroeconomic uncertainties such as the Eurozone crisis and lower demand from India have exerted downward pressure on
diamond prices in recent months. This has prompted some diamond producers to defer some of their sales in anticipation of
better prices in the future. Further, the credit tightening in Europe and India has resulted in reduced buying activities
and inventory cuts by the diamantaires.
The 2012 outlook for rough diamond prices appears to be dim, and this trend is likely to remain until 2014, when constrained supply, stable US demand and increased demand from emerging economies is expected to pull rough diamond prices up. Average world diamond prices are expected to decline by two percent in 2013, followed by a seven percent increase in 2014, a peak rise of nine percent in 2015 and then a four percent per annum growth until 2020. This price trend can change in a situation of higher volumes of lower value diamonds entering the market.
Significantly, by 2020, demand from Asia is expected to constitute 44 percent of the total demand, up from 36 percent in 2011. China and India are expected to be the key demand centers, constituting 13 percent and 12 percent, respectively, of the total demand in 2020.
The strategy of the Company is to capitalize on the current and future trends by selling to diamond dealers located in the main world centers, customers and potential investors, which will expand our customer base by offering ETFs in the world market when available.
Of all the precious metals, gold is the most popular as an investment. Investors generally buy gold as a hedge or harbor
against economic, political, or social fiat currency crises (including investment market declines, burgeoning national debt,
currency failure, inflation, war and social unrest). The gold market is subject to speculation as are other markets,
especially through the use of futures contracts and derivatives. This suggests a reason why gold is sold off during economic
In a time of extreme economic instability, investors seek to strengthen their portfolios with assets that give them greater security. A safe haven protects investors against a possible catastrophe. That's why many investors bought gold during the 2008 financial crisis. Gold prices continued to skyrocket in response to the eurozone crisis, the impact of Obama care, the Dodd-Frank Wall Street Reform Act, and the 2011 debt ceiling crisis. Many others wanted to protect their investments against a possible U.S. economic collapse. As a result of this extreme economic uncertainty, gold prices more than doubled again, from $869.75 in 2008 to a record high of $1,895 on September 5, 2011.
Bullish investors may choose to leverage their position by borrowing money against their existing assets and then purchasing gold on account with the loaned funds. Leverage is also an integral part of buying gold derivatives and unhedged gold mining company shares. Leverage or derivatives may increase investment gains.
Gold, like all precious metals, may be used as a hedge against inflation, deflation or currency devaluation. As Joe Foster, portfolio manager of the New York-based Van Eck International Gold Fund, explained in September 2010: The currencies of all the major countries, including ours, are under severe pressure because of massive government deficits. The more money that is pumped into these economies – the printing of money basically – then the less valuable the currencies become. If the returns on bonds, equities and real estate do not adequately compensate for risk and inflation, then the demand for gold, and other alternative investments (such as commodities) increases. An example of this is the period of stagflation that occurred during the 1970s, which led to an economic bubble forming around investment in precious metals. However, after a period of financial stress, such as the Great Recession, eases conventional investments become more attractive, and gold values may fall.
The Company will market its gold bars through private contracts or LBMA. In addition, the Company will offer contracts in derivatives and gold certificates.
Gold certificates allow gold investors to avoid the risks and costs associated with the transfer and storage of physical bullion (such as theft, large bid-offer spread, and metallurgical assay costs) by taking on a different set of risks and costs associated with the certificate itself (such as commissions, storage fees, and various types of credit risk). Banks may issue gold certificates for gold which is allocated (fully reserved) or unallocated (pooled). Unallocated gold certificates are a form of fractional reserve banking and do not guarantee an equal exchange for metal in the event of a run on the issuing bank's gold on deposit. Allocated gold certificates should be correlated with specific numbered bars, although it is difficult to determine whether a bank is improperly allocating a single bar to more than one party.
The first paper bank notes were gold certificates. They were first issued in the 17th century when they were used by goldsmiths in England and the Netherlands for customers who kept deposits of gold bullion in their vault for safe-keeping. Two centuries later, the gold certificates began being issued in the United States when the US Treasury issued such certificates that could be exchanged for gold. The United States Government first authorized the use of the gold certificates in 1863. In the early 1930s the US Government restricted the private gold ownership in the United States and therefore, the gold certificates stopped circulating as money (this restriction was reversed on January 1, 1975).
Nowadays, gold certificates are still issued by gold pool programs in Australia and the United States, as well as by banks in Germany, Switzerland and Vietnam.
Derivatives, such as gold forwards, futures and options, currently trade on various exchanges around the world and over-the-counter (OTC) directly in the private market. In the U.S., gold futures are primarily traded on the New York Commodities Exchange (COMEX) and Euronext.liffe. In India, gold futures are traded on the National Commodity and Derivatives Exchange (NCDEX) and Multi Commodity Exchange (MCX).
As of 2009 holders of COMEX gold futures have experienced problems taking delivery of their metal. Along with chronic delivery delays, some investors have received delivery of bars not matching their contract in serial number and weight.
Outside the US, a number of firms provide trading on the price of gold via contract for differences (CFDs) or allow spread bets on the price of gold. The current analyst predictions regarding the price of gold for the years 2013 and 2014 differ, but seem to be mostly positive.
Bank of America Merrill Lynch forecasts a gold price of $2,400/ozt. for the end of 2014 . Key price drivers are expected to be interventions by the Fed and the European Central Bank. According to their analyst MacNeill Curry, the gold price could ultimately reach $3,000 to $5,000ozt.
HSBC analysts James Steel and Howard Wen predict an average price of gold of $1,850/ozt. for 2013 and an average price of $1,775/ozt. in 2014.
We call for partners, financier or investor, because our projection is of 10 to 12% interest per year in cash or product,
as reality, is there is plenty of product because we will excel if we embrace more partners, financier or investor and more
we will have capital to move it and high ROI (Return on Investment) .
We use security teams, professionals and services to guarantee to our clients our commitment to issue a security application
Feel free to check our website to see a summary of what we do and who we are, and more, we are open to all mining companies and miners to come and be part of our projects to grow with us and together spread the wings as an Eagle and fly with no limit. In addition, if you have any question, we are here to clarify it, to make you comfortable and secure to do business with us.