Gold vs Diamonds: Which is Best for Investment?

When it comes to jewellery, it doesn’t get more luxurious than gold or diamonds. Both of these materials are valued for their beauty as well as their ability to store wealth, but as investments, gold and diamonds function very differently…

In this blog, we explain what to know about investing in gold vs diamonds. We’ll look at the similarities and differences between each investment, including their pros and cons, and offer a comparison table to help you decide which investment is best for you.

Investing in diamonds

Believe it or not, diamonds weren’t always considered as valuable as they are today. Our perception of diamonds has largely been shaped by a 1947 marketing campaign by the British diamond company, De Beers.

De Beers created artificial scarcity for diamonds by controlling mining and limiting supply, allowing them to charge high prices even though diamonds themselves are not inherently rare. What really drove diamonds to popularity, however, was the company’s popular 'A Diamond is Forever' campaign that turned a diamond engagement ring into a must-have all over the world.

Before this campaign, diamonds didn’t carry the same cultural or financial significance they do today.

From an investment perspective, natural diamonds derive their value from a combination of rarity, quality, and demand. High-quality stones, especially large, flawless, or rare coloured diamonds, can appreciate over time, especially when scarcity is combined with strong market interest. At this stage, colourless diamonds are the most widely sought after, although certain coloured diamonds can command a premium due to their rarity.

Other reasons that make diamonds valuable include:

• Durability: Diamonds are the hardest naturally occurring substance in the world, ranking a 10 on the Mohs Hardness Scale. This makes them resistant to wear and damage, and allows them to retain their physical condition for long periods of time (hence why a diamond is forever!).
• Portability: Diamonds are compact and easy to store. You can keep a high-value stone in a safe or vault and transport it with relative ease compared to bulkier assets.
• Versatility: Diamond jewellery comes in all forms, from rings to necklaces or earrings.

That said, there are also important things to consider when investing in diamonds:

• The 4Cs: The value of a diamond is based on the 4Cs: cut, colour, clarity, and carat, and even small differences in these characteristics can lead to large price variations. This makes it difficult to get an accurate valuation.
• Certifications: It’s essential to purchase a legitimate, certified diamond with a grading report from an accredited gemological laboratory to verify quality and authenticity (i.e. earth-mined or lab grown).
• Resale: Diamond resale can be tricky, because unlike gold, they do not have a universal spot price. As a result, their value can vary widely depending on buyer demand, market conditions, and the network through which they’re sold. This makes diamonds less liquid and more volatile than gold, especially outside the very top end of the market.
• Polished vs rough: If you do wish to invest in diamonds, it’s always best to purchase a polished diamond over a rough one. Even though rough diamonds are more affordable, the process of turning them into a finished product is costly and difficult.

Investing in gold

One of the main strengths gold has over diamonds is that it’s universally recognised, with transparent pricing that makes it easy to understand and trade. Gold is bought, sold, and valued in global markets every day, making it highly liquid and easily converted to cash when needed.

Gold’s value is also supported by its intrinsic properties. Gold is rare, durable, and unlike diamonds, cannot be manufactured artificially. Every gram of gold, whether in the form of a coin, bar, or piece of jewellery, is chemically identical and has the same purity and value. This makes it extremely easy to understand the value of your holdings.

See: Why Has Gold Always Been Valuable?

From an investment perspective, gold is often used as a hedge against inflation and economic uncertainty. During periods of rising inflation, geopolitical tensions, or currency devaluation, investors often turn to gold for its safe haven status. Unlike traditional assets, like equities or bonds, its value isn’t tied to the performance of a single company, government, or financial system. This makes it an excellent portfolio diversification tool.

Gold also tends to perform well over the long term. Although gold prices can fluctuate in the short term, historical data shows that gold has preserved purchasing power across generations, making it an ideal option for investors focused on wealth preservation rather than short-term speculation. This is an important distinction over diamonds, considering much of their value is based on a 1940s marketing campaign.

One of the other benefits of gold investment is its flexibility. Gold investors can choose from bullion bars, gold coins, jewellery, or even through gold-backed ETFs, which don’t require the need for storage. Even within those categories, you could opt for a 1 gram gold bar or a 1 kilogram gold bar, an American Eagle gold coin or a Gold Britannia coin. Either way, when it comes to resale, gold is highly liquid with globally standardised pricing that makes it easier to sell without any specialist knowledge or access to niche markets.

Keep Reading: Pros and Cons of Buying Gold Bars vs Gold Coins

Where gold and diamonds are similar

Now that we’ve gone over the basics of gold and diamond investment, let’s look at where the two are similar.

Both are precious natural resources with high aesthetic value. They are also relatively easy to transport and store, although diamonds are more portable than gold – a high-quality diamond weighing about 2-3 grams can have the same value of 100kg of gold.

Gold and diamonds are also both scarce, although their scarcity is relative. If all the gold ever mined was melted into a single cube, it would measure roughly 20 metres on each side and could fit within a large sports field. Diamonds, on the other hand, are much more scarce in investment-grade form, especially natural coloured diamonds. Of the more than 120 million carats of diamonds mined each year, only a small fraction will qualify as gem quality. And of the gem quality diamonds, only one in a few hundreds of thousands will have enough colour to be classed as a fancy coloured diamond.

Learn More: How is Gold Formed and Where Does it Come From?

Differences between investing in diamonds vs gold

Standardisation

The main difference between gold and diamonds is standardisation. Gold is a homogenous asset, which means one ounce of gold is identical in value and composition to any other ounce of gold of the same purity. Its price is determined almost entirely by weight and gold market conditions, making valuation straightforward and transparent.

Diamonds, on the other hand, are the opposite. Every diamond is unique, and its value depends on multiple factors including cut, colour, clarity, carat weight, and overall quality. You could have two diamonds of the same size that vary dramatically in price. This makes diamonds much more complex to value and trade.

Liquidity

Liquidity is another major difference between the two. Gold has a deep, global market with established pricing. You can buy or sell gold through bullion dealers, jewellers, financial institutions, and private buyers with minimal friction, making it easy to exchange for cash when needed.

Because each stone is unique, diamonds have lower liquidity and cannot be easily exchanged. To resell a diamond, you may have to see a specialist dealer or auction house, and prices can vary significantly depending on timing and buyer demand. This is why diamonds aren’t really used for short-term investing.

On top of that, it’s not advised to purchase a diamond for investment purposes unless you have access to expert guidance, as it’s easy to overpay or purchase an inferior quality stone without realising.

Similar Reading: What is the Cheapest Way to Buy Gold?

Pros & cons of investing in gold

Pros of investing in gold

Some of the advantages of investing in gold include:

• Stable long-term value: Gold has maintained its value over time and historically performed well during periods of economic uncertainty. This stability makes it popular amongst investors looking to preserve their wealth.
• Hedge against inflation: Gold is widely considered a hedge against inflation. Its value often maintains, or even increases, when the purchasing power of currency declines.
• High liquidity: Gold is easy to buy and sell, with transparent pricing and strong global demand. This makes it easy to value and liquidate your holdings when needed.
• Flexibility: You can buy gold in the form of bullion bars, coins, jewellery, or exchange-traded funds (ETFs), giving you more flexibility with your investment.

Learn More: Exploring the Role of Gold as an Effective Hedge Against Inflation

Cons of investing in gold

Some of the drawbacks of gold investment include:

• No income generation: Unlike stocks or bonds, pure gold doesn’t produce dividends or interest. Your returns are based solely on the appreciation of gold’s price over time.
• Storage & insurance costs: Physical gold requires secure storage to protect your investment. This might involve extra fees and insurance costs that can add up over the long term.
• Price volatility: Even though gold’s price is considered stable over the long term, it can still fluctuate in the short term with changes to interest rates, geopolitical tensions, or investor sentiment.

Pros & cons of investing in diamonds

Pros of investing in diamonds

Some of the advantages of investing in diamonds include:

• Rarity: High-quality diamonds, especially large or naturally coloured stones, are genuinely scarce.
• Aesthetic appeal: Diamonds have an aesthetic appeal that can give them additional value.
• Long-term value: High-quality, fancy-coloured, large, or antique cut diamonds are likely to appreciate in value over time.

Cons of investing in diamonds

Some of the drawbacks of diamond investment include:

• Low liquidity: Diamonds are difficult to sell quickly, and their value is often subjective.
• Lack of price transparency: Unlike gold, diamonds don’t have a universally accepted spot price. This can make it difficult to understand the value of your stone, putting you at risk of overpaying or receiving an unfair offer.
• Risk of fraud: The diamond market has a history of misrepresenting diamond quality and selling synthetic diamonds under the guise of authenticity. It's important to be cautious when purchasing diamonds and access expert advice where possible.

Gold vs diamonds: Which is the better investment?

At the end of the day, whether diamond or gold investment is better largely depends on your goals and what you value in an investment. The table below summarises the key differences between the two at a quick glance.

	GOLD	DIAMONDS
PRICE TRANSPARENCY	Highly transparent pricing. Gold has a globally recognised spot price that’s updated daily and used consistently across all markets.	Low transparency. The price of a diamond depends on the 4Cs (clarity, colour, carat, cut) and market demand.
EASE OF VALUATION	Easy, value is determined by weight and purity.	Complex, each diamond is unique and requires expert grading and certification.
LIQUIDITY	Very high. Gold can be bought and sold quickly worldwide through dealers, banks, exchanges, and private buyers.	Low. Diamond resale often requires specialist buyers or auctions.
FUNGIBILITY	Fully fungible. One ounce of gold is interchangeable with any other ounce of the same purity.	Not fungible. Every diamond differs in terms of cut, colour, clarity, and carat weight.
PRICE VOLATILITY	Moderate short-term volatility, but strong long-term value preservation.	Lower short-term volatility, but slower and less predictable appreciation.
LONG-TERM RETURNS	Historically reliable store of value over long periods.	Potential for rare, high-quality, or large stones, but returns can vary widely.
INVESTMENT OPTIONS	Physical gold bars, coins and jewellery, ETFs, gold mining stocks	Physical stones.
RISK FACTORS	Prices can shift depending on interest rates, geopolitical tensions, and global markets.	Market opacity, risk of fraud, competition from lab-grown diamonds.
ACCESSIBILITY	Suitable for both beginner and experienced investors, easy to understand and learn.	Best suited to specialist or long-term investors, the diamond industry is more complex to navigate.

Invest in gold bars and coins

If you’re a beginner investor, or someone who values liquidity, flexibility, and transparency, then gold is the clear winner when it comes to investment. Browse our selection of gold bullion bars and gold coins, sourced from the world’s most trusted mints, and start your precious metals investment journey today.