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Thursday, September 29, 2011

Are Diamonds Rare?


In the 1870s at the Kimberley mine in South Africa a 128-carat, canary-yellow diamond called simply The Tiffany, was discovered. The diamond-encrusted mines at Kimberly became known as kimberlites and their discovery began a huge mining operation that continues to this day.

What the kimberlites offered was once-rare gem to millions upon millions of ordinary consumers and soon after thousands of prospectors were thrown into fierce competition causing diamond prices plummeted from 500 dollars to ten cents a carat.

With diamonds increasingly in abundance, Cecil Rhodes founded the De Beers Mining Company as a group of diamond producers. His first aim was to control production to prevent too many diamonds hitting the market and therefore keep prices high.

By controlling the supply and demand since that time De Beers has perhaps become the most successful cartel of the 20th century. In the 1920s De Beers ran a successful marketing campaign that transform the public imagination about the diamond and has to this day managed to link diamonds as a symbol of human love and devotion. In 1994, the Department of Justice charged De Beers in a price fixing scheme. Although the company denies the allegations the company failed to turn up in court and so the matter remains unresolved.

To the question that is sometimes asked "Are diamonds rare or are their prices hideously inflated?" De Beers officials are usually unresponsive on these points but instead they claim that the company has "democratised" diamonds by offering them to millions of ordinary consumers.

Critics argue that diamonds are at best semi-precious stones and that were it not for De Beers, and considering the amount of diamonds in current circulation and the amount that are stock piled by De Beers, consumer quality gems commonly used for engagement rings should be cheap and in abundance.

Do you think that diamonds are rare and would you consider them as an investment?

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