Diamonds vs. Precious Metals: What Shines Brightest in Your Investment Portfolio?

30 Pages Posted: 22 Oct 2015

See all articles by Rand Kwong Yew Low

Rand Kwong Yew Low

University of Queensland Business School

Yiran Yao

University of Queensland

Robert W. Faff

University of Queensland

Date Written: October 20, 2015

Abstract

Several studies explore the use of gold and other precious metals for protecting investors’ wealth during periods of market turmoil. However, alternative investments, although increasing in popularity, still remain unfamiliar to the majority of investors. We explore the safe haven and hedging properties of diamonds versus precious metals in an international study to evaluate diamonds as a viable investment alternative. Furthermore, we compare the performance between the returns of physical diamonds and diamond indices. Our analysis indicates superior performance by precious metals compared to diamonds. However, investors enjoy greater benefit from directly investing in physical diamonds rather than diamond indices. For investors looking to protect their assets against highly volatile market conditions, precious metals remain a better option. Investors should continue to keep abreast of developments with the evolution of the diamond investments industry and physical diamonds can be included in a portfolio for their downside diversification potential.

Keywords: gold, diamonds, safe haven, hedges, precious metals

JEL Classification: G10, C11, G14

Suggested Citation

Low, Rand Kwong Yew and Yao, Yiran and Faff, Robert W., Diamonds vs. Precious Metals: What Shines Brightest in Your Investment Portfolio? (October 20, 2015). Available at SSRN: https://ssrn.com/abstract=2677043 or http://dx.doi.org/10.2139/ssrn.2677043

Rand Kwong Yew Low (Contact Author)

University of Queensland Business School ( email )

Building 37-411, Joyce Ackroyd
St Lucia
Brisbane, QLD 4122
Australia
+61 7 3346 8124 (Phone)
+61 7 3346 8166 (Fax)

HOME PAGE: http://www.business.uq.edu.au/staff/details/rand-low

Yiran Yao

University of Queensland ( email )

St Lucia
Brisbane, Queensland 4072
Australia

Robert W. Faff

University of Queensland ( email )

St Lucia
Brisbane, Queensland 4072
Australia

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