Diamonds are an attractive option for investors looking to diversify portfolios because they don't move in relation with other assets such as commodities and stocks, according to David Riedel, President of equity research firm Riedel Research Group.
“Over the past decade cross-asset correlations have nearly doubled, (but) diamonds have exhibited very low correlations to other assets making them an attractive source of diversification. They have almost no correlation to anything else – commodities, gold, equity markets,” Riedel told CNBC on Wednesday.
In 2011, the RapNet Diamond Index (RAPI) for one carat polished diamonds rose 19 percent outpacing gold , which rose 10 percent. And supply constraints are expected to take diamond prices even higher in the coming years, says Riedel.
He estimates demand for diamonds will grow 50 percent between now and 2015, driven by consumption in the United States, China and India, while production will rise by just 24 percent.
“Diamond mines tend to be most productive near the surface, and like a funnel become less productive as you go deeper,” says Riedel, which restricts supply.
Demand out of the U.S., which currently accounts for 40 percent of global diamond purchases, is set to strengthen alongside the pick up in its economic recovery, he said.Page 1 of 3 | Next Page