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Diamonds are investors best pals. They have been treasured as gemstones and ever since from the beginning their popularity has increased because of advertising, increased supply, improved cutting, polishing techniques and also growth in the world economy. Although diamonds are not normally used as a mainline store of value during times of crises due to low liquidity and fungibility. 20 % of the mined diamonds are used in jewelry and 80 % for other industrial uses (such as lasers, drill parts and surgical equipments). The De Beers Group controls the wholesale diamond price, which has an estimate 35 to 45 % of the world market. Botswana is currently the largest producer of diamonds, with a joint ventures between De Beers and Botswana government. The United States is the biggest consumer of diamonds in the world accounting for 35 % of the diamond sales, Hong Kong 26 %, Belgium 15 %, Japan 6 %, and Israel 4 %. The price of diamonds fluctuates with global demand and world economy. The price of the diamond may vary widely depending upon the diamond’s carat, color, clarity, cut and shape. As compared to any precious metals, there is no universal world price per gram for diamonds. There is no natural shortage of diamonds as they can be synthesized at much lower cost than the equivalent natural diamond price. Diamonds may also be a problematic investment. While it is easy to buy a diamond, it is never easy to sell one unless one is an already established diamond merchant. Another problem faced by the investor is that purchasers other than established jewelers, will be paying retail for a stone but can get only wholesale al most if they sell it back to jeweler. Fraud is a major risk when buying from non-industry sources and even retail jewelers are skittish about it. Some firms may also offer investment grade to public. A prudent investor should ask for a written promise to rebuy the diamonds at or near the purchase price within a specified period. Today only a few funds are there that are investing in diamonds. These funds purchase unique diamonds, each stone is checked by the professionals and negotiated until the fund decides to purchase it. Then a marketing team goes into action and through an extensive work the fund yield is gained. Polished and rough diamonds lack some of the desirable attributes of investment vehicles. The increasing quality and size, and decreasing price, of synthetic diamonds also presents a threat to the value of polished diamonds as a long term investment.
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