Is investing in diamonds smart or a fool’s game?

Summary: When people talk about investing in precious metals, usually they mean gold and silver, or even platinum or palladium. However, the volatile investment market is leading many investors to turn to hard assets that they can enjoy, such as art, jewelry, and of course, diamonds. Until recently, diamonds were not thought of as a pure investment for a number of reasons, including lack of transparency and the difficulty in creating a pricing standard for unique stones. But a growing number of companies have answered the challenge by developing diamond-backed exchange-traded or mutual funds. With increasing global appetite for diamonds and a limited number of mining operations, supply and demand are working in the investor’s favor and driving up prices. In April, Sotheby’s sold a 74.79-carat white diamond for $14.2 million in competitive bidding, well above its presale estimate of $9-$12 million. Read more…