Will Diamonds Become The New Gold Not Bitcoin ?

The old familiar phrase goes “Diamonds are a girl’s best friend” but soon it maybe “Diamonds are an investors best friend”.  Lately there have been several articles that have caught trader’s attention as gold seems to have lost its luster since touching the 1900 price a bit ago. Many speculators were hoping that bitcoin the new digital currency would serve as a new investment vehicle, but with global legal problems have scared off investors along with the difficulty of owning, trading or possessing their “digital” investments.

The questions on many traders lips is could diamonds be the new gold? As traders look for a new commodity, many are behind the scenes pushing to turn the gem into a commodity that would be available to investors in the way that gold has been traded through funds on exchanges. At present trading in diamonds is limited in the United States to the retail market for engagement rings and other jewelry and the back-room bargaining among merchants in places like Manhattan’s diamond district.

Speculators in New York, London, Switzerland and Israel say there is an opening to provide reliable public access for the growing universe of investors who have been willing to sink money into funds backed by exotic assets like palladium and silver. Those investors have turned a gold-backed fund, the SPDR Gold Shares, into one of the world’s largest exchange-traded funds, with a market capitalization of about $70 billion.

The advantage diamonds have over bitcoins, is that they are real and can be bought, sold and owned in the physical market and not deep in the internet. Pressure has been growing in recent months around the potential of diamonds to become a veritable asset class for the first time. Unlike gold, the gems currently have no spot price or conventional market besides jewelers and pawn shops. The renowned emerging markets investor Mark Mobius recently told MarketWatch that he has visited pawn resellers to get a firsthand view of the market for diamonds, which he believes are on the cusp of a boom, and which may eventually be available to investors via funds.

One surprising factor that’s driving demand is the relatively new but exploding appetite in China for diamond engagement rings. Prospective grooms splurging on a diamond is, of course, a standard part of the American engagement process. But it was largely a foreign concept to the Chinese until just a few years ago, says Rick de los Reyes, portfolio manager for T. Rowe Price’s Global Metals and Mining Strategy. Diamond demand has increased in the U.S., too, thanks to the strengthening economy. The U.S. imported nearly $23 billion of polished diamonds in 2013, up more than 16% from 2012, according to the Rapaport Group, a market research firm that maintains its own index for diamond prices. According to that index, the average price of diamonds increased almost 14% to $1,855 per carat last year.

Diamonds have one big advantage as they are already graded and rated which will make them easy to trade in standardized global contracts, they are also easy to hold and store, where gold storage is expensive taking up safety vaults around the world. Diamond are also etched with number so they are easily tracked. Many investors are hoping to see Diamonds traded on the global exchanges within the next year or two.