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Gold vs. Diamonds:
Comparing Commodity Investments

When investing in commodities, there are few options as popular as gold and diamonds. These luxury goods have been considered wealth and prosperity symbols for centuries. Because of this association, they tend to be viewed as investments with lasting monetary value. In terms of recent returns, the price of diamonds has steadily risen since January 2020, whereas the price of gold has remained flat. Which is the better option for the future, gold or diamonds?

Gold
Fundamentals

Gold is a store of value. It has generated positive long-term returns in both good and bad economies. It is a high-quality, liquid asset used as a safe haven investment in times of economic crisis and market volatility.


It is perhaps the most precious of metals because it does not tarnish nor rust and can quickly work with other metals. Gold has been admired throughout history for brilliance in jewelry. There are different gold colors, but according to the World Gold Council, yellow gold is the most popular color for jewelry.


Historically, gold has been connected with money. According to the German economist Hans Sennholz, “For more than two thousand years, gold’s natural characteristics made it man’s universal means of trade.”


Gold is considered a portfolio diversifier. Importantly, it is a reserve asset for central banks.


The World Gold Council notes that gold is historically connected with money, but gold relinquished this role in developed economies after World War II when the Bretton Woods monetary system (a fixed exchange rate regime) was created. The system broke down for good in 1971 after the United States ended its gold standard.


Compared to political money, gold is honest money that has lasted for centuries and will continue to exist after today’s political fiat currencies have faded.


Price History
Long term history of gold

In 1971, when the United States unilaterally ended its gold standard, the convertibility of gold and the US dollar equalled $35 per ounce. Gold price per ounce was $600 in 1980, but gold price today is $1,700 per troy ounce (or more).


Gold exchange products were introduced to the market in the early 2000s (e.g., the SPDR Gold ETF was listed in 2004) and with the increased demand, gold prices began to rise. The new investment vehicles significantly improved access to this unique, investable asset. Gold prices bottomed in 2016 and since then have risen due to increased demand and supply issues.

A Good Investment?
Gold Coin

Investing in gold is generally a safe investment. While there is always a chance that the price of gold will go down, it is a relatively steady option. This can be a great hedge against inflation. Another advantage of gold investment is that you can buy it in smaller portions. You can purchase small gold nuggets, gold coins, or even gold jewelry. You can also invest in gold bars if your budget allocation is higher.

Diamonds
Brilliant Fundamentals

Diamonds have been treasured historically for their beauty and look. Diamonds are a long-term store of value, an uncorrelated asset, and an inflation-resistant natural resource. Diamonds have been used for their hardness, luster, brilliance, and thermal conductivity. As Lewis Vertoman States: “The diamond has always been esteemed the rarest stone, and the most precious of all: among the ancients, it was called the stone of reconciliation.”


Investing in diamonds can be used for portfolio diversification. Like gold, you can purchase diamonds to add to your investment portfolio. The most famous diamonds are used as gems in jewelry. Investors own only 1% of the $1.2 Trillion diamond market, owing to their limited access to diamond investments.


That is no longer the case, as Diamond Standard has developed the world's first and only regulator-licensed diamond commodities. Each diamond Coin or Bar contains an equivalent set of natural diamonds and a wireless chip containing a blockchain token for trading.


Diamonds are now available to investors as a commodity. As a result, for the first time, institutions and investors can build positions in the diamond asset class as new securities are introduced. Pent-up demand is estimated to be 15% — the smallest share of precious metals supply that investors own.


The diamond commodity will become more liquid as new securities are issued. “Anything that can bring transparency to the diamond price is a good thing,” said Karl Smithson, CEO of Stellar diamonds.


Price History
Long term history of diamonds

In the past, most investors viewed diamonds as an illiquid and opaque asset. Diamonds returned a pitiful 5% over the 19 years before 2021 and 41% over the last 20 years compared to the S&P 500 tripling and gold sextupling in value across the same period. Furthermore, product prices are over 60% higher than in 2002, meaning that the inflation adjusted of an investment in diamonds would have decreased over this period. Even for determined diamond investors, the pricing of the gemstone was extremely ambiguous.


According to some sources, when the world began to reopen in 2021 after the worst of the pandemic, demand for diamond jewelry soared significantly, reaching 29% higher than the previous year. Diamonds have the potential to increase in value as investor demands grow, particularly when the diamond supply chain depletes. According to Rahul Kadakia, Christie’s International Head of Jewelry, “Diamonds are the most portable form of wealth, and that has always been true.”


Diamond Standard’s Coin price is DIAMINDX. While the coin's market price has only been available since its initial public offering (IPO) in 2021, historical price data is estimated by backtesting published wholesale diamond trading prices.

A Good Investment?
Diamond Coin

There are multiple benefits to investing in diamonds. First, diamonds are precious gemstones. This means that it is more likely that your investment will be worth more than the initial value in the future. Another advantage is that diamonds can be resold easily. If you need to liquidate your investment quickly, it can be easy to do so with diamonds.


Gold vs. Diamonds: Overview of Fundamentals

Total Supply
$ per Ounce
Investor Holdings
Gold GOLD
$9 trillion
$1,800
30%
Gold DIAMONDS
$1.2 trillion
$260,000
1%
% of stock
% of flow usage
New Supply
Recycled
Asset
Jewelry
Industry
Destroyed
1.5%, growing
0.4%
38%
48%
13%
1%
1.2%, diminishing
Near 0%
1%
98%
0%
1%

Gold vs. Diamonds: Overview of Fundamentals

Gold GOLD
Total Supply
$9 trillion
$ per Ounce
$1800
Investor Holdings
30%
% of stock
New Supply
1.5%, growing
Recycled
0.4%
% of flow usage
Asset
38%
Jewelry
48%
Industry
13%
Destroyed
1%
Gold DIAMONDS
Total Supply
$1.2 trillion
$ per Ounce
$260,000
Investor Holdings
1%
% of stock
New Supply
1.2%, diminishing
Recycled
Near 0%
% of flow usage
Asset
1%
Jewelry
98%
Industry
0%
Destroyed
1%

Gold vs. Diamonds: Uncorrelated Advantages

Diversification is essential to mitigate risk in any investor’s portfolio. An investor can reduce the portfolio risk by holding assets that are not highly correlated. The lower the correlation between two assets, the lower the resulting portfolio volatility with respect to asset price movements. For this reason, most savvy investors hold a diverse mix of assets, preferably with low or negative correlations to maximize returns for a given level of non- diversifiable or systematic risk.


Both gold and diamonds exhibit low historical correlations to other assets, and to each other. Diamonds in particular see negative correlations. In the 20 years since January 2002, diamond prices have had a near-zero correlation to gold, silver, equities, and bonds. Correlations from the last two years are even lower, with diamonds having a below -0.1 correlation with precious metals and bonds and an around -0.2 correlation with market indices.


The low correlations diamonds have relative to multiple asset classes suggest that diamond prices have a number of independent drivers different from other frequently traded assets. However, diamond correlations may increase with the anticipated increase in investor holdings.

Correlation Between Diamonds and Related Investments

January 2020 - October 2022,
Weekly Returns

correlation-between-diamonds-golds
correlation-between-diamonds-golds

Drag to see more

Diamond commodities are distinguished from other portfolio securities by having a low, often negative, correlation to many traditional investments.
Source: Bloomberg, 2022

Three Ways to Buy Gold Now

Physical Ownership

Investors can directly go to retail stores and purchase most precious metals. Especially for gold, its value is recognized globally which can be easily transportable and storable compared to other commodities. Gold is indestructible, serving as the tangible long-term store of value. Plus, gold is highly liquid and when you are in need of cash, you can simply trade with any gold retailer at the spot gold price minus transaction fees. Nowadays, with the advent of online bullion dealers, it is much easier for consumers to purchase high-quality precious metals and have it shipped home.


Worries of counterfeit metals and safekeeping may make consumers hesitate to own them physically. Even though physical gold is a mostly fear-free holding, investors may desire safer and more convenient investment vehicles such as exchange-traded funds and tokenized commodities.

Exchange-Traded Funds (ETFs) and Mutual Funds

Unlike physical gold, ETFs can be purchased in small shares on a stock exchange with quicker transaction speed and enhanced convenience. Compared to physical gold, the ETFs can be less costly for investors who only want small exposure to gold by eliminating the storage and insurance fees, transaction fees and markups associated with buying and selling the commodity. It not only lowers the investment threshold by pooling cash with other limited partners, but also grants more liquidity to narrow the bid-ask spread. On top of that, holding an ETF in a taxable account will generate less tax liabilities than traditional mutual funds, which can be more tax efficient for investors.


Commodity ETFs have been a popular instrument for investment. For example, BlackRock manages iShares Gold Trust, which offers exposure to gold with $28 billion assets under management, allowing investors to free themselves from finding a safe for gold storage.

Tokenization of Commodities

Tokenized commodities are digital claims of physical assets whose tokens are administered on blockchains similar to crypto. Blockchains guarantee your tokens’ identities with spotless transparency, no single authority can erase or alter your ownership — your ownership of that real asset will change only after you trade it with someone else.


With tokenization, investors are able to long and short a fraction of asset ownership bringing more liquidity and demand to the traditional commodities market. Moreover, it reduces the transaction cost and complexity by leveraging the decentralized ledgers, which settle transactions peer to peer, without going through a central clearing exchange. Because of decentralized ledgers, tokenized commodities overcome the time and border constraints of conventional investments. That is to say, investors can trade anytime, anywhere.


In the gold markets, Paxos introduced its asset-backed token (PAXG) to be traded at the equivalent value of one troy ounce of gold. Anyone who owns PAXG directly owns gold held in custody by Paxos Trust Company.

Three Ways to Buy Diamonds Now

Diamonds have been a long-ignored investment despite its scarcity and capability to hedge against inflation. Diamond Standard invented the first and only regulator-approved diamond commodity. Each fungible Diamond Standard Coin & Bar contains diamonds with similar geological scarcity via optimization.


By standardizing diamonds, a once dysfunctional diamond market has become investible for the first time in history.


Just like the gold investment vehicles described above, Diamond Standard offers similar ways to participate in commodity investment.

In March 2021, Diamond Standard launched its Diamond Standard Coin, which is a digital and physical smart commodity. By optimizing the value of sets of diamonds, each Diamond Standard Coin has equal geological value. In March 2022, Diamond Standard offered another fungible diamond commodity: the Diamond Standard Bar. Its value is ten times the prevailing price of the Coin. Both commodities are deliverable assets with embedded crypto features.

For accredited investors seeking a convenient and cost effective investment vehicle run by experienced managers, the recently launched Diamond Standard Fund provides significant benefits. The Fund is sponsored by Diamond Standard & Horizon Kinetics and holds Diamond Standard commodities (Coins and Bars)..

Last but not least, Diamond Standard is about to launch a tokenized diamond commodity. Bitcarbon is a cryptographic token representing a fraction of a deliverable commodity and is created through conversion by the physical commodity (Diamond Standard Coins & Bars) owners.

Invest in DIAMOND STANDARD CO. Offerings

Smart commodity you can hold in your hand

CARATS

CARATS

Commodity Token / $100 minimum

$ 1.082
  • A commodity token issued from Diamond Standard Commodities
  • Instantly redeemable for physical diamond commodities
  • Zero conversion costs between Carats and commodities
Invest
Diamond Standard Coins

Diamond Standard Coins

Fungible Commodity

$ 4,020
  • Contains 0.18 to 0.75 carat stones in a 35mm diameter transparent Coin
  • Buy and sell on the Spot Market
  • All diamonds independently graded by GIA or IGI
Invest
Diamond Standard Bars

Diamond Standard Bars

Fungible Commodity

$ 40,200
  • Contains 0.76 to 2.05 carats stones in a 70mm by 35mm transparent Bar
  • Valued at 10 times the market price of a Coin
  • Lowest commodity custody fees
Invest
Diamond Standard Fund

Diamond Standard Fund

For Accredited Investors

  • Shares offered in a private placement pursuant to Rule 506(c) under Regulation D
  • Co-sponsored by Diamond Standard and Horizon Kinetics
  • Third party administration by NAV
Invest

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