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VIDEO: What Makes a Diamond A Good Investment?

October 27, 2021

 

What makes a diamond an investment-grade diamond? If you’ve ever wanted to invest in diamonds, but you didn’t know which ones to consider, you’ll know the answer by the end of this video.
 

VIDEO TRANSCRIPT:

Hi, everyone. First, I’d like to thank Jerry for inviting me back on the program.

Previously, I explained how my company, Icecap, uses NFT Token Technology, to create an efficient diamond marketplace for hard asset investors and provides those investors with transparent pricing, easy liquidity, and low bid-ask spreads.

Today, I’d like to talk about what makes a diamond a good investment. What makes a diamond an investment-grade diamond? If you’ve ever wanted to invest in diamonds, but you didn’t know which ones to consider, you’ll know the answer by the end of this video.

Unfortunately, there’s no particular pattern to which qualities of diamonds preserve their value best over time. In a sense, they all do. That’s the good news. Like gold, the diamond market generally moves upwards outpacing inflation, but different types of diamonds will move in value differently over time. Fortunately, not a lot differently. So how do we know which diamonds are truly the best for investment? How do we determine what is truly an investment-grade diamond?

Well here’s our answer: An investment-grade diamond is a diamond that is as easy to sell as it is to buy.

Unfortunately, most diamonds can be very difficult to sell. So why is that? Well, it’s because diamonds, unlike gold, are non-fungible, meaning they’re all different. That means that a buyer is going to typically have to look at a diamond, to see it in person, to know what it’s really worth.

Today’s diamond market is very efficient in moving diamonds from the mine to the cutter to the wholesaler to the retailer and finally to the consumer. The market is extremely inefficient when the consumer or the investor needs to reverse that flow and sell the diamond back upstream. Typically you have to sell your diamond to a retailer, who will then sell it to a wholesaler. That wholesaler is going to need to see the stone before he can even make a bid. That’s why liquidity is so difficult, and buy-sell spreads are so high. It’s a very inefficient process.

Why can’t dealers just look at certificates?

If you’re familiar with diamond grading certificates, you might ask the question, well, why can’t the dealer just look at the certificate and base his offer price on what the certificate says? Well, he can’t. And the reason he can’t is where we’re gonna get into some of the diamond industry’s most closely guarded secrets.

  • Reason 1: Certs can be inaccurate. First, grading certificates are often not accurate and can even be counterfeit. If you think you own a GVS1, you might actually own an HVS2. There are simply a lot of quality control issues when it comes to certificates.
  • Reason 2: Diamond could be damaged. Second, the diamond may have suffered damage since it was graded. It’s almost impossible to scratch a diamond. But it’s not that difficult to chip a diamond, and even a slight chip will reduce the value.
  • Reason 3: Diamond might not have been cut properly. Third, the diamond might not have been cut properly. If it was cut properly, that will show on the certificate as a triple X cut grade. If it’s less than perfectly cut, meaning not a triple X cut grade, then it’s going to affect the light performance of the diamond. But how much it’s going to affect it, is very difficult to know, without seeing the stone in person. So that’s another reason the diamond wholesaler making a bid on the diamond has to see it if it’s not a triple X diamond.
  • Reason 4: 4Cs are only 70% of the value. And here’s the big one that almost no one knows about. The 4Cs Diamond Grading system that was popularized by the GIA, only covers about 70% of the diamond’s value. So that system of grading a diamond by color, clarity, carat weight, and cut quality is great, but 30% of the value, it doesn’t show up in those 4Cs Gradings. If there are things like fluorescence and clouds and graining and a bunch of gemological stuff that you probably don’t want to have to learn about, if any of those things are in the diamond, the certificate will show it. But it won’t be obvious how bad they are, much like poor cutting. You have to see the stone to know how bad those things are.

How does Icecap solve these problems? It’s very simple. We only tokenize diamonds that don’t have these problems.

  • Solution 1: Double Grading, Verification & Auditing. First, Icecap requires that every diamond be double graded, verified, and audited by a company called GCAL (Gem Certification and Assurance Lab). GCAL’s business is auditing GIA certs, and they are the toughest critics on the planet. They have to be, because they’re guaranteeing the grading itself. They back up their grading with a guarantee and they have an insurance policy that backs up their guarantee. No other lab in the world does this, not even GIA. This step screens out inaccurate or counterfeit certs.
  • Solution 2: No damaged, poorly cut, or questionable diamonds. Second, Icecap rejects any diamond that has suffered damage that is less than triple X in cut quality, or that has any significant issues beyond the 4Cs. By eliminating all those, what we might call problem stones, our tokenized diamonds can be bid on by wholesalers without them needing to see the stone to make a bid. These standards rule out about 85% of total diamonds. Not many diamonds make it through these very tight quality control standards. For given color and clarity, and carat weight range, only about 15% of the diamonds that are out there will make it through these tough quality control standards. But a stone that does make it through these standards will accept down to half a carat in size, color range from D down to I, and clarity from flawless to VS2. Now, those are very good diamonds, those are the kind of diamonds you’d find at Tiffany’s, for example. But more importantly, they are very easy-to-sell diamonds.

Remember: You want to buy diamonds that will be easy to sell.

So in summary, it’s not the precise color, clarity, and carat weight that makes a diamond an investment-grade diamond. It’s the ability for that diamond to attract bids from wholesale buyers, without those buyers having to see the stone in person first. And that’s what creates an efficient market. It’s what creates liquidity. Those are the diamonds an investor should buy, and those are the diamonds that Icecap sells. That’s what we mean by investment-grade diamonds. So thanks very much for listening.

If you’d like to know more about Icecap and buying diamonds for investment, please call our sales representative Tom Cloud at 912-771-9353. And Jerry, thanks again for having us on the program.

Interested in adding investment-grade diamonds to your hard asset portfolio?

Contact Tom Cloud at 912-771-9353 or by email at tomcloud1630@gmail.com

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