Peter, thanks for the update on the Bell report.
You said, "My thoughts are that possibly Diamonds will rise in conjuction with the price of Gold. Diamonds have in the past have kept their value even when times were hard and gold was much higher then now. This could mean that some investors prefer to keep parcels of diamonds instead of bulk gold in their mattresses. In times of turmoil especially in countries where a financial meltdown could easily turn nasty, diamonds are a very portable commodity."
I agree with your observation about diamonds values in relationship to gold's so long as an inflationary environment can be expected. In any event, I don't think people will be stuffing diamonds into their mattresses because they are so difficult to use in trade. That is, their value can not be easily identified as can an ounce of gold. A diamond can have can have a value between a few dollars and tens of thousands of dollars depending upon the 4 c's. An ounce of gold is an ounce of gold.
The cloud I see for diamonds is the possibility of a worldwide recession, or worse. History shows diamond prices fell during the 30's and even De Beers had to close mines. We know that demand has
softened in the Far East because of economic conditions. We also know the market fears Russia may dump diamond (as well as oil) in an effort to generate hard currency to save their economy. I believe, but don't know for a fact as yet, that demand has also softened in Europe and Latin America. I think we can safely speculate that demand is beginning to soften in North America as well because of the bear market in stocks - people feel less well off and are therefore less likely to purchase luxury goods like diamonds.
Looking at your theory then, the only thing left to sustain diamond prices might be investor interest. Perhaps I'm wrong, but I can't see that keeping prices up when the retail market is failing. By contrast, gold demand is going up as the financial crisis deepens, and it is experiencing demand from both individual and institutional investor's.
Don't get me wrong. I'm not trying to trash the market for diamond mining stocks and I'm certainly not short SUF. ...just wondering about the future while considering some realignment of my portfolios. As I suggested yesterday, if the diamond market suffers causing SUF stock prices to retreat from these levels, I would buy betting on a larger and stronger company evolving during a general economic recovery.
VP |
