diamonds vs gold as an investment
Life Tips

Money Matters: Diamonds vs. Gold As an Investment

If you are looking to make an investment that guarantees you impressive returns, then you should invest in gemstones. Precious stones are highly treasured and hardly depreciate. The most popular and valuable gems today are diamonds and gold. This article discusses diamonds vs. gold as an investment to help you make a well-informed investment decision.

What Holds More Value: Gold or Diamonds?

Value

For a long time, people believed that stocks and bonds were excellent ways to invest their money. But the ongoing slump and market volatility have forced people to consider alternative investments like precious stones. That’s why diamonds and gold have become so popular in the global investment markets. So, if you’re looking for a better way to invest your money, you could try any of these precious stones.

But before you invest your hard-earned money in any of these stones, you have to know which one is more valuable. After all, you want to invest in something that will guarantee you the highest return on investment (ROI). The truth is that both diamonds and gold are safe investments because their value hardly depreciates.

The value of gold, diamonds, and any other precious stone is mainly determined by their rarity. So, when you are deciding what to invest in between diamonds and gold, you need to consider its availability. If it’s readily available, its price is often likely to fluctuate.

Gold is a very rare stone that is found in rocks. Its bulk in the earth’s crust is estimated to be only four parts per billion. But despite its rarity, the price of gold keeps fluctuating. Therefore, you have to exercise a lot of patience when you’re investing in gold so that you can resell it at the perfect time.

Also, the policies of acquiring gold on paper today mean that you won’t be getting real gold when you make a purchase. This means that even though your cash in gold ETF, you will not have the actual physical gold.

Paper gold is a general term for various types of gold-related possessions that replicate the commercial price of gold, even though they’re not real gold.  Physical gold, on the other hand, is real gold that comes in many forms, including stones, bars, treasures, jewelry, and more.

Diamond is also a precious stone that comprises a highly pressurized carbon in the earth’s crust. Its concentration is currently estimated to be 200,000 parts per billion. This means that diamonds aren’t very rare. However, large diamonds are hard to find. Also, it’s easy to generate synthetic diamonds in a lab using graphite.

Therefore, the price of common diamonds tends to be lower than that of physical gold, depending on the size. But you can also choose to invest in the more valuable type of diamond – colored diamonds. This type of diamond is usually very expensive and unachievable for most investors.

Pros and Cons of Investing in Diamonds

Diamond

Demand for real diamonds is growing steadily, with many investors choosing them as their preferred investment. But before you decide to invest in diamonds, it’s important to understand their pros and cons.

Pros of Investing in Diamonds

1. High Demand and Low Supply

For many decades, the price of diamonds has been on a steady rise owing to the growing demand for real diamonds. The rising demands have also made the few stones available very expensive. Save for synthetic diamonds that are readily available, genuine colored diamonds are quite rare and in low supply.

As a result, these gems have become very expensive, especially when they’re embedded in jewelry. Therefore, you’ll have a perfect opportunity to make good money when you invest in real diamonds.

2. Portable

Diamonds are small portable stones that you can carry with you wherever you go. For instance, you can wear them as jewelry or carry them as loose stones in your pocket. This is not possible when you invest in luxury cars or real estate.

3. Price Independence

Unlike other forms of investment, the price of diamonds is rarely affected by instabilities in the stock, bond, and oil markets. The price of diamonds remains fairly steady even during economic, political, and social instability.

4. Ease of Storage and Maintenance

Since diamonds are made from natural minerals, they’re naturally strong and hard-wearing. They can last for many decades. Therefore, storing and maintaining your diamond stones shouldn’t be difficult. However, make sure that the stones don’t rub against each other.

Cons of Investing in Diamonds

1. Expensive

The rarity of diamonds makes them very expensive. Therefore, not everyone can invest in real diamonds. A simple natural, unblemished diamond stone can fetch tens or hundreds of thousands of dollars.

2. Easy to Lose

The portability of diamonds makes them susceptible to theft and misplacement. If you carry your diamonds in your purse or wear them as jewelry, you can easily lose them when they fall off or get stolen.

3. Fake Diamonds

As noted, diamonds can be synthesized in a lab. Although the difference between real and fake diamonds is quite apparent, it’s very easy to buy fake ones. Some unscrupulous jewelers have devised technologies that perfect fake diamonds, making it difficult for you to differentiate between the fake ones and the real ones.

4. Hard to Resell

Since genuine diamonds are too expensive, you might experience difficulties when trying to resell them. This can be disappointing if you’re facing a financial emergency that requires you to sell your diamonds immediately.

Pros and Cons of Investing in Gold

Gold

Pros

1. Inflation Hedge

One of the main concerns that investors have when they’re investing their money is the kind of effect that inflation is likely to have on their investments. Inflation always affects the value of the currency in the banks. Therefore, the money in your bank may lose value over time. But gold is less likely to be affected by inflation.

2. Easily Accessible

Gold is now being sold online through trading websites. You just need to join the trading platform and start trading immediately, provided you have enough money to buy gold. You can also trade in gold through a brokerage account.

3. Security of Price

Since gold isn’t severely affected by inflation, you’ll enjoy an element of security of value knowing that your gold will steadily grow in value. Although the price may dip occasionally, it’ll go back up as quickly as it drops. So, unlike investing in bonds, mutual funds, and stocks, you don’t have to worry about how the performance of certain industries and corporations affects the value of your gold.

Cons

1. Storage Difficulties

Gold is a rare and very luxurious commodity that everyone wants to own. Therefore, you have to invest heavily in the storage and safety of your gold. In most cases, you’ll be forced to rent a vault in a secure storage facility or financial institution where you’re certain that your gold will be safe.

2. Inactive Income Asset

Unlike investing in real estate, which will generate income almost immediately, gold won’t generate any income when you own it until you sell it or use it in any other way to make money. So, if you are looking for an investment that will give you an income instantly, then gold isn’t the right choice.

3. Taxes and Premiums

When you buy gold, you’re expected to pay a premium, which is often marked up from the existing market price. So, you’re likely to count losses if your gold loses value. You’re also expected to pay taxes to the IRS.

Diamonds vs. Gold: Which Is Better?

Apart from being timeless souvenirs, diamonds and gold are highly valuable, giving you an opportunity to make a smart investment. Although these gems will give you a handsome ROI, it’s important to understand how investing in each of these stones works. That way, you’ll be able to determine which one makes more sense with regard to making the right investment.

Whether diamond or gold is better depends on several factors. For instance, none has a set price because the demand for both gems fluctuates frequently. However, gold appears to be the preferred choice for many investors because it’s hardly affected by inflation and offers a reliable ROI. Furthermore, gold is used as a currency in some parts of the world, which isn’t the case for diamonds.

This, in a sense, makes gold more valuable than diamonds. However, diamonds are known to have a more resale value, which makes them more valuable in this respect.  But you’ll enjoy this value if you invest in high-quality diamonds. You should also choose your diamonds carefully to avoid purchasing synthetic imitations.

Previous Post Next Post

You Might Also Like