These facts alone make colored diamonds worthy of consideration by sovereign individuals seeking discreet investment opportunities. But colored diamonds are also hot investments. 

Since formal records were first kept at the beginning of the 1970s, prices for the highest grades of colored diamonds have increased in value by an average of between 10%-15% per year, with rarer colors and higher grades enjoying the greatest appreciation. In addition, this appreciation has statistically been non-correlated to the stock and bond markets, an important consideration for investors seeking a diversified portfolio. 

And, price appreciation is increasing. “The market for natural colored diamonds is very strong at the moment and prices have risen by 25% within the last year,” says Andrew Coxon, vice president of De Beers in London. If that pace continues, an investment in natural colored diamonds today could double in value in the next 36 months. In addition, because of a major development in the colored diamond industry I’ll describe momentarily, that pace could pick up considerably. 

A Major Development 
All diamonds are relatively rare. But colored diamonds are far scarcer than white diamonds. Indeed, for every 10,000 carats of diamonds mined, only one carat will be a fancy colored diamond. That rarity has appealed to persons of wealth and discretion for centuries. Indeed, many of history’s really famous diamonds, including the Hope Diamond and the Tiffany Diamond, are colored diamonds. 

Some of today’s most popular colored diamonds are the purplish pink and pink diamonds from the Argyle mine in Australia. Until the mine opened in 1985, pink diamonds were almost unknown, and today, this mine accounts for over 90% of the worlds pink diamond supply. However, less than 0.1% of the mine’s output are rare pink diamonds. Indeed, one year’s Argyle production fills a small truck, but the pink diamonds fills only half of an ashtray! 

The best pink diamonds came from the alluvial deposits; the watery areas surrounding the Argyle mine. However, Argyle’s owner, Rio Tinto, shut down alluvial diamond recovery in 2003. As a result, the quality of the pink diamonds coming out of the mine since then has gradually and consistently gone down. 
Recently, Rio Tinto announced that it will shut down all open-pit operations at Argyle in 2008 and convert the facility into an underground mine. 

Experts agree that with underground mining, there will be fewer quality stones, average sizes will continue to decrease and the supply will drop by at least 40%. All of these factors are likely to lead to a substantial increase in pink diamond prices. 

Real world auction results support this conclusion. Pink diamond prices continue to achieve record prices at the world’s auction houses with prices consistently above US$100,000/carat for high-quality stones. 
• April 1998 New York Christie’s 539 Oval 1.02 Intense purplish Pink, US$58,529/carat 
• December 2004 New York Sotheby’s 351 round 1.23 Intense purplish Pink, US$143,089/carat