The glitter of diamonds has been drawing wealthy investors to auction lately, where they've been bidding record prices for the precious gems.
Two high-profile auctions this past spring resulted in jaw-dropping diamond sales. A nearly 102-carat stone from Botswana sold for $26.7 million at Christie's, while Sotheby's auctioned a 74.5-carat yellow diamond for nearly $3 million, setting a record per-carat price of $40,061.
In October, Sotheby's plans to test the appetite for diamonds even further with its offering of an egg-sized, 118-carat gem that is expected to fetch from $28 million to $38 million.
Diamonds are high-stakes investments that come with a hefty entrance fee. Because there are so few options for flawless stones right now, they are limited to buyers with deep pockets, says Edahn Golan, an analyst specializing in the diamond industry. Those interested in owning rare, large diamonds can expect to pay at least $1 million, he adds.
But while auctions provide some sexy publicity, they may not be the best place to buy, according to Golan. It's difficult to realize a return later on when everyone knows how much you paid for the jewel, he says. In addition, the premiums set by the auction house and the seller hike the purchase price even further.
Investing in gemstones is more like investing in art, with buyers seeking to own the asset rather than realize a return, says Brent Fykes, senior investment partner at GenSpring, a multifamily office for individuals with at least $20 million to invest.
For buyers seeking smaller-stakes diamond investments to fatten their portfolios, there are few options for the average investor. Venturing into this complex trade requires a deep understanding of the investment -- or an expert guide. Read more in this article on investing in diamonds.
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