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INTRODUCTION
Having minored in geology at
the University of Michigan to include studying mineralogy, I have
had an avid interest and fascination in colored gemstones for over
30 years. In the early 1980's, I began studying the pricing
of one carat flawless, D colored brilliant white diamonds, and
came to the conclusion that the future prospects for appreciation
may be limited due to over-production and the impending dis-inflationary
environment initiated by Paul Volcker's tenure at the Federal
Reserve . This long-range forecast turned out to be right on
the money as flawless, D colored diamonds are just about at the
same level as 1981, selling for about $12,500 per carat; demand at
this price level has not kept up with increasing supply. However, as we entered the post-Bubble
New Millennium of the 2000's, I began to do extensive research
into Fancy Colored Diamonds, the rarest class of diamonds in hues
of pink, red, green, blue, gray, purple, orange, olive, brown, and
yellow. Coincidently, I discovered that colored diamonds
were gaining in unparalleled popularity, and public awareness of
them was expanding exponentially with the advent of internet
diamond sites. In 1999 alone, the Gemological Institute of
America (GIA), the recognized premier grader of natural colored
diamonds, noted a 102% increase in fancy colored diamond
submissions. The dye was cast going into the New Millennium.
Due to affordability and relative under-valuation
with respect to the other hues of fancy diamonds, I have decided
to concentrate initially on natural fancy colored YELLOW diamonds,
specifically INTENSE YELLOW and VIVID YELLOW, which are 10,000 times
more rare than their brilliant white, colorless counterparts.
Where the presence of any
tinge of color in a brilliant, white diamond is considered a
negative, and hence the letter "D" is granted only for
the most white of gems, totally devoid of any tinge of color, intensity of coloration is the single most important quality of a
Fancy Colored Diamond. WCM does, unquestionably as
clearly depicted on our OFFERINGS
page, have access to
many other hues of colored diamonds, such as the similarly rare
cognac's, browns, ultra-rare greens and the very rare pinks &
blues. We have some of the best industry contacts in the
colored diamond trade. These colored diamonds are naturally
much more expensive per carat than Yellow diamonds, except for the
Brown hues, but daily increases in demand for tangible assets,
specifically fancy colored diamonds, makes marketability of more
expensive gems greater and greater. As investment and
collection recognition grows, the liquidity of colored diamonds
grows with it, and we expect this trend to continue for many years
to come.
Client
requests for a specific fancy colored diamond will be honored, but
colored diamonds represent a fraction as small as One One-Hundred Thousandth
( 1/100,000 ) of the total annual diamond
production in the world. Hence, a client could wait a while for a specific colored diamond during a period when
prices continue to move upward. Another aspect of Fancy
Colored Diamonds that drew me to this investment area was the fact
that prices for Fancy Yellow Diamonds have not declined on an
annual basis, year-to-year in any
single year since 1970. In fact, using wholesale selling
prices and auction results from Christie's and Sotheby's, annual
prices realized have increased from 7% to 12% per annum for the
last 32 years.
There is much educational material on the internet pertaining to
the 4 C's of diamond buying, but Carat, Clarity, Cut, & Color
parameters must be modified to pertain specifically to Fancy
Colored Diamonds. In the case of always buying a One Carat
brilliant white diamond, there are very good values in the fancy
diamond marketplace today in the 0.50 carat to 1.00 carat weight
range, and color intensity or saturation by far remains the single
most important criterion for selecting a Fancy Colored
Diamond. The specific color scale for fancy diamonds starts
at Fancy, to Fancy Intense, to Fancy Vivid, to Fancy Deep, and finally to Fancy
Dark, the most saturated coloration (and also the most
out-of-reach from a price/availability standpoint). As to Clarity, many of the most saturated colored
diamonds, in the two highest designations of Fancy Deep and Fancy
Dark have Inclusions under 10 times magnification only;
these still "eye clean" gems are hence clarity graded Slightly Included as SI1 and SI2,
and even SI3. Although initial buyer preferences can be for the best of all
characteristics with VS2 being the most included level sought, this degree of clarity actually requires magnification under a 10x
loupe by an experienced gemologist or gem grader in most instances to observe these minute inclusions (
internal flaws ). By over-concentrating on a given Clarity
Level, prospective buyers can miss opportunities with strikingly
colored diamonds that are still "eye-clean", Slightly
Included ( SI1 - SI3 ), that is, devoid of
readily visible inclusions without a jeweler's loupe.
On to Cut, the Brilliant Round cut that is the
traditional favorite for white diamonds does not particularly
enhance the internal color reflections of a fancy colored diamond
unless the pavilion depth of the gem is shortened. Radiant, Cushion, Princess and skillful
modifications of these cuts are quite popular, while well-cut Emerald,
Marquise, and Oval cuts in fancies appear less frequently. The actual optimization of the particular type of cut
to a given rough colored diamond to
maximize the presentation of the available internal color can and does vary
from the traditionally "ideal" proportions sought for
brilliant, white diamonds. Yet, GIA certifiers
still make note with adjectives describing the proportionality of cut
as Poor, Medium, Good, and Very Good to address this issue as specifically adapted to fancy colored diamonds. Note that a non-perfect
application of the cutter's tools, creating slightly modified proportions
of width, length, and depth from white brilliant diamond
standards, are readily compensated for by a finely
saturated or unique color emission from the resultantly cut colored diamond.
Richness and uniformity of color is the cutter's goal by
attempting to produce very good light return in the gem without a preponderance
of washed out areas or "light leakage, a bow tie effect in
oval cuts, or overall patchy light return in marquise cuts.
Finally, the Color criterion for brilliant white diamonds must be
abandoned in favor of the GIA Master Color Set of fancy colored
diamonds to ascertain what level of intensity exists in a
certified fancy colored diamond. Hence, from weakest
coloration to strongest, GIA assigns the designation of FANCY, FANCY INTENSE, FANCY VIVID,
FANCY DEEP, and FANCY DARK; Fancy Light is also used as the
faintest designation of coloration. As in the colors of the rainbow,
there are many modifying colors found in nature due to traces of
nitrogen, boron, hydrogen, or structural anomalies. In the
fancies we will be offering initially, these naturally occurring
impurities can create
a deep yellow diamond (canary), brownish-orange diamond (cognac) or an orange diamond where
reddish hues have combined with yellow hues. The dominant
color is always listed last, as in Brownish-YELLOW. Personal tastes come
into play in actually selecting which combination of colors one
desires in a Fancy Colored Diamond, but rarity and hence, price,
should always be defining factors in guiding this selection. Investment interest and
affordability, which spells "liquidity" upon resale,
leads WCM to concentrate on the Fancy INTENSE and Fancy VIVID
degrees of coloration for acquisition. Thus, we will be foregoing
the vast majority of Fancy or Fancy Light designated gems since
their rarity is not nearly as great, with the exception of Fancy
Light Pink which is the second most rare coloration at any
saturation level.
As in investments in all assets classes, one must address the
issue of resale before entering into any transaction ($5,000
minimum transaction value).
All of the Fancy Colored
Diamonds that will be offered for sale by Wexford Capital
Management are priced to clients in such a manner as to be able to
appraise or retail at least 30% above original client cost.
Hence, clients will
have purchased at approximately 30% below jeweler's bottom-line
"retail" pricing. Such an
appraisal must be performed by a certified gemologist, preferably
certified by GIA, Gemological Institute of America. It is
quite possible that WCM Fancy Colored Diamonds will retail or
appraise substantially more than 30% above WCM's Offer Price, to as much as
50% above, but we strive
to be conservative in all representations to clients. We
feel strongly that Fancy Colored Diamonds offer excellent
appreciation potential in the 5 to 10 year time horizon we see
enfolding ahead. At a minimum, even in a truly deflationary
environment and with hundreds of years of history as our guide, a
Fancy Colored Diamond would hold its rare, intrinsic value while
most other assets whither. Otherwise, we would never have done the
extensive research over many years to find honest, reliable, and economic sources
for investment-quality Fancy Colored Diamonds in order to offer
these very rare gems to investors and collectors, our valued clients. Each
diamond will be reviewed by an experienced gemologist/ colored
diamond broker in addition to being accompanied by a GIA Colored
Diamond Grading Report. The original GIA report accompanies
all WCM shipments of Fancy Colored Diamonds.
Please visit the pages of
our certified colored diamond website to learn more about fancy
colored diamonds and don't hesitate to contact David Young at
877-855-9760 or at diamonds@wexfordcoin.com
to discuss this fascinating and potentially rewarding tangible
asset area. Alternative assets are looking better and better
by the minute as the traditional landscape around us sees storm
clouds brewing. Prices will move even higher once the
investing public realizes the historic risk in traditional
financial and real estate assets today.
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