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Diamonds are the new gold, says Singapore exchange

SDiX has listed Diamond Bullion, a product designed to boost investment in diamonds.

The Singapore Diamond Mint announced on October 10 that with Diamond Bullion, diamonds could be traded on an investment exchange.

“The Diamond Bullion is designed to bolster investment in diamonds as an asset class and presents investors the opportunity to invest in diamonds as a safe haven asset for the first time in history,” explained Alain Vandenborre, founder and chairman of the Singapore Diamond Investment Exchange (SDiX) and director of the Singapore Diamond Mint Company (SDM).

“We believe that diamonds have the potential to rival gold’s status as a secure store of wealth and an alternative investment; hedging against inflation, volatility and currency deflation.”

The SDiX is described on its website as “a portable, credit card-sized package of investment-grade polished diamonds sourced at wholesale prices and issued in standard denominations; a fully fungible product that can be exchange-traded for instant price transparency and liquidity.”

Nevin Sher of South Africa’s Central Diamond Administration, who has also been a buyer and reseller within South Africa’s diamond industry for years, unpacked further:

“What the SDiX has done is take a certain range of GIA-certified diamonds and say ‘this is the combination of clarity, colour, cut and so on that will be worth this much’.

“They have also partnered with blockchain experts to trial a verification and record-keeping service for diamond trading on a global commodity exchange. If they are able to succeed in this endeavour, we could see a new era of diamond investment emerge.”

‘If’ seems to be the operative word. There have been several attempts to standardise diamonds – like the West Coast Commodities Exchange of 1974, the short-lived Diamond Index and Polished Prices conference of 2007 and many others. The Singapore Diamond Mint company is also less than a year old.

According to Vandenborre, 2017 technology is precisely what makes this attempt different:

“The Diamond Bullion is a fintech product using proprietary technology to authenticate and trade at fully transparent pricing on the SDiX, in a tamper-resistant zirconia case with unique optical signature recognition and a serial number that can be instantly authenticated via secure mobile app (both Android and Apple). The GIA certificates of every diamond within the Diamond Bullion are pulled from the server and shown on the app – removing the need to have any expertise of diamonds.”

Still, Sher cautions that “this is something where you really need to be an expert in what you are trading. Diamonds are one of the most difficult things to standardise, because a one-carat diamond can have more than 100 different combinations of colour, clarity, cut, weight, inclusion and more and each of these has a different value. So, two different products could vary greatly with the exact same specifications on paper, and even the same stone could vary based on opinion. Gold is transparent – everyone in the world agrees that this much is worth this amount – so the price is fixed.”

Could something like this ever come to South Africa? After all, the Diamond Bullion’s diamond inscription and verification service to confirm authenticity is being provided by the International Institute of Diamond Grading and Research (IIDGR), part of South Africa’s De Beers.

The Johannesburg Stock Exchange declined to comment on whether diamonds could ever be traded on its boards. However, according to Central Diamond Administration, “if an exchange around the world were to get it right, it is possible that this offering could come to SA. However, for the exchange to be successful, it would need to standardise and regulate diamonds across the whole world, the same as the gold standard”.

“There is no current diamond investment platform on any exchange in South Africa that offers this type of investment opportunity,” said Sher. 

However, according to Vandenborre, the SDiX is a global exchange, which means investors from South Africa will be able to invest, purchase and trade the Diamond Bullions as long as they instruct their trades via one of the broker members of SDiX. “The exchange currently has no stock or commodity broker in South Africa; London and Dubai are markets where South African investors can trade. But it would make sense to have some brokers from South Africa to solicit membership of the exchange.”

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