Diamonds Vs Gold - Which Is Best For Investment?

One of the most important factors for consideration before investing in either gold or diamonds, is its liquidity. Gold is often considered as synonymous with expression of love. Read to know more!

22 Nov,2023 06:28 IST 991
Diamonds Vs Gold - Which Is Best For Investment?

Since time immemorial, gold or gold jewellery has had an inseparable bond with women and Indian households. Almost every Indian household has gold either as a piece of jewellery, as bullion (though rare) or both. Considered a symbol of wealth and prestige, gold is also revered for its investment value in India. In other countries of the world, gold is often considered as synonymous with expression of love. The second identity that gold has in the western world is as investment in Gold ETFs, which is a relatively recent phenomenon.

However, in recent years, diamonds have risen in competition to gold on the luxurious consumption side. Though the two are often paired together to make attractive jewellery, as individual commodities or asset classes, both are viewed differently. Hence, this brings us to the pertinent debate of, Investing in Diamonds Vs Gold?

We look at some facts that will help us decide which of the two is a better investment class.

Liquidity:

One of the most important factors for consideration before investing in either gold/gold jewellery or diamonds, is its liquidity. Having an established global market with regular trading makes it easier to buy and sell gold. However, diamond/diamond jewellery is difficult to liquidate as it requires a buyer valuing specific characteristics of the diamond.

Storehouse of Value:

Another determinant that investors consider is the value of gold vs diamond. Generally, gold/gold jewellery is preferred because of its long history as a storehouse of value and wealth. Diamond/diamond jewellery on the other hand does not bring in a higher resale value as gold, owing to market demand and the presence of intermediaries in the diamond industry.

Stability Amid Market Volatility:

Gold prices are influenced by factors such as, demand-supply conditions, inflation and other economic conditions. Diamond prices fluctuate due to consumer demand, fashion trends and dynamics of the diamond industry. Nevertheless, gold prices are much more stable than the price of diamonds.

Safety Concerns:

Gold is a traditional haven for people who want to safeguard their money against major external circumstances. Diamonds are generally not considered a safety hedge against external conditions. Also, there is transparency when one buys gold, unlike diamonds which can also be synthetically produced.

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Fungibility:

Gold is more fungible, meaning it can be exchanged for other assets of the same type unlike diamonds, which can be exchanged only when the other diamond is of same quality and meets the same specifics such as colour, cut, clarity and carat. This weakens its liquidity too.

Purity:

When it comes to gold karat vs diamond carat, there is no instance of gold being produced artificially so far. Diamonds, on the other hand, are made synthetically better than the naturally-sourced ones. Making diamonds artificially is also much cheaper than mining them traditionally. This means, pure gold is definitely rarer than diamonds.

Long-term Gains:

With respect to diamond vs gold price, gold is sure to become stronger over time, even with the intermittent fluctuations. Gold makes for a viable asset class that reduces risk even while creating wealth. Diamonds on the other hand, do not enjoy price appreciation and hence cannot give the long-term gains as much as gold.

Conclusion

While some challenges to investing in gold jewellery such as verifying the rarity of gold and storing gold coins and bullion do exist, diamond jewellery carries the risk of not adding enough appreciation value over time.

Even as the debate about gold and diamonds as an investment class continues, it is quite unlikely that an individual does not invest in gold/gold jewellery as their life’s first investment in jewellery. Overall, it then appears that Gold turns out to be a preferred investment class.

However, when considering an investment, it is always advisable to check with a financial advisor or an expert in precious metals and gemstones before putting your money in either asset class.

At IIFL Finance, your precious gold jewellery stands an even better chance of adding more value to your life. IIFL Finance offers gold loan, gold loan for women and  MSME gold loan among its other loans against gold offerings with gold loan interest rate. These loans are designed to meet the target group’s specific requirements.

Make the smart move! Apply for an IIFL Finance Gold Loan today and fulfil all your dreams!

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Disclaimer: The information contained in this post is for general information purposes only. IIFL Finance Limited (including its associates and affiliates) ("the Company") assumes no liability or responsibility for any errors or omissions in the contents of this post and under no circumstances shall the Company be liable for any damage, loss, injury or disappointment etc. suffered by any reader. All information in this post is provided "as is", with no guarantee of completeness, accuracy, timeliness or of the results etc. obtained from the use of this information, and without warranty of any kind, express or implied, including, but not limited to warranties of performance, merchantability and fitness for a particular purpose. Given the changing nature of laws, rules and regulations, there may be delays, omissions or inaccuracies in the information contained in this post. The information on this post is provided with the understanding that the Company is not herein engaged in rendering legal, accounting, tax, or other professional advice and services. As such, it should not be used as a substitute for consultation with professional accounting, tax, legal or other competent advisers. This post may contain views and opinions which are those of the authors and do not necessarily reflect the official policy or position of any other agency or organization. This post may also contain links to external websites that are not provided or maintained by or in any way affiliated with the Company and the Company does not guarantee the accuracy, relevance, timeliness, or completeness of any information on these external websites. Any/ all (Gold/ Personal/ Business) loan product specifications and information that maybe stated in this post are subject to change from time to time, readers are advised to reach out to the Company for current specifications of the said (Gold/ Personal/ Business) loan.

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