Diamonds Vs. Precious Metals [Which Is The Better Investment?]

Whether to invest in diamonds or precious metals is the big question asked by first-time investors. Is one less risky than the other, or should you consider investing in both?
Infographic of a group of people looking at investing in diamonds or precious metals

Precious metal and diamond investments rank among the most popular investments because they offer reliable hedges during uncertain economic times. Like most other investments, the value of diamonds and precious metals do fluctuate, but they never fluctuate enough to foreshadow financial ruin. While taking risks on the stock market always carries the possibility of losing thousands of dollars (or more) on one share of a company, investing in these two commodities does not carry such unpredictable risks.

The reasons precious metals and diamonds remained favored investments for decades include:

  • No need to hire a broker or deal with stock-associated “red tape.”
  • Their market prices are not dependent on the dollar’s value in times of inflation.
  • They are “tangible” assets, meaning once an investor buys diamonds or precious metals, they actually own them.
  • Plenty of investors purchase tangible assets, like diamonds and precious metals, regardless of the state of the economy. This is why these two investments are considered high-liquid investments.
  • Diamonds and precious metals–especially precious metals–remain relatively stable in value during global or national economic stress. This makes them safe havens or investments that reliably maintain their value.

Diamonds vs. Precious Metals

We will dig a little deeper into the difference between investing in diamonds vs. precious metals. 

Precious Metals

There are four precious metals that investors commonly purchase: gold, silver, palladium, and platinum. Resistant to corrosion and holding high economic values, these four precious metals are valued more than others because they are difficult and expensive to mine. Precious metals are not only used to make high-end watches, bracelets, and other jewelry, but they’re also needed to manufacture digital devices, military equipment, and communication satellites.

Gold

Gold coins, bars, certificates, and jewelry are popular forms of gold investments in the U.S. They’re all tangible assets, except certifications. Bank-issued gold certificates are official documents asserting the holder of the document owns a specific amount of allocated or unallocated gold. An allocated gold certificate indicates the document clearly states the exact number of gold bars the holder owns. An unallocated gold certificate allows the gold supplier to use the holder’s money for investing in their own assets.

Bullion Gold Coins vs. Certified Gold Coins

Bullion gold coins are assigned fairly small premiums that are backed by the federal government. Certified gold coins have bigger premiums and are not seized by the Internal Revenue Service. Certified gold coins are not required for listing assets on tax forms.

Investing in bullion gold coins provides short-term (one year) yields. Alternately, certified gold coins provide long-term yields. Both bullion and certified gold coins are good investments to guarantee profits. Which one an investor chooses to purchase simply depends on their current financial needs.

Silver

Unlike gold’s ability to increase in value over time, silver routinely experiences more volatile price fluctuations than gold. The reason for silver’s instability involves its dual perception as an industrial metal or a valuable asset. In addition, silver’s value shifts frequently according to the introduction of novel inventions. For example, silver was once an essential precious metal that supported the camera industry. Today’s digital photography devices do not require silver. However, the rapid rise in the use of superconductor applications, microcircuits, solar panels, and electric vehicles has again made silver a favorite precious metal investment.

The main problem with investing in silver bars or coins is storage. One ounce of gold or palladium is worth much more than one ounce of silver. Accumulating tangible silver investments requires larger areas than needed with gold or other precious metals.

Diamonds

Diamonds are valued according to certain external and internal factors. The four Cs of diamond appraisal are cut, carat (weight), clarity, and color, and they determine a diamond’s value. More specifically, the rarity of any of the four Cs significantly affects a diamond’s value. For example, colorless diamonds are more valuable than light yellow or light brown diamonds because they’re rarer than colored diamonds.

Clarity involves internal elements of a diamond called blemishes and inclusions. Blemishes are surface irregularities, while inclusions are flaws in clarity typically caused during its formation in the earth. Seasoned investors know to avoid the following inclusions: etch channel, cavity inclusion, chip inclusion, and knot inclusion. These flaws will severely devalue a diamond.

The cut of a diamond is the primary factor that influences how well the diamond sparkles. Diamond facets are flat surfaces that enable the diamond to absorb light and give off sparkles. Expertly cut diamonds with rarer coloring and flawless clarity are highly valuable and sought after by diamond investors.

Diamonds vs. Precious Metals: Which Is the Better Investment?

The bottom line:

The demand for precious metals and diamonds constantly fluctuates, resulting in the absence of an established value for either asset.

Gold is a safe haven because of its enduring ability to provide reliable returns, act as a hedge against inflation, and increase in value over time.

Some global regions still consider gold an actual currency. Diamonds are not considered currency in any country. On this basis, gold is often thought of as a better investment than diamonds.

Diamonds typically have a more profitable resale value than gold if, and only if, they rank high for each of the four Cs. If you are thinking of investing, do your research, and only trust verified appraisers to examine your diamonds.

Values of precious metals and diamonds rely mostly on the availability of the metal or diamond. As the earth is depleting tangible investment resources like diamonds and precious metals, the likelihood of both steadily increasing in value over the next 50 to 100 years is excellent.

Deciding whether to invest in precious metals, diamonds or even both is a choice that should involve an investor’s current financial condition if the investor has long-term or short-term financial goals and whether the investor intends to diversify their portfolio.

You might also be interested in: Gold: More Than Just A Shiny Metal – Strategies For Investing In Gold

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