Acquiring giant pink stone a ‘dream’ for New York Diamond cutter

One of the exceptional diamonds sold at auction in 2013 – if not the outstanding diamond of the year – a 59.60-carat pink diamond, was acquired by New York-based diamond cutter Isaac Wolf. The diamond, sold for $83 million in Geneva by Sotheby's in November, setting a record for any gemstone at auction. In a sign of the profound interest and demand for such stones, the exceptional pin had a presale estimate of more than $60 million – about three-quarters of the actual sale price.
Wolf promptly set about renaming the oval-cut diamond the ‘Pink Dream’. He competed against three other bidders for the diamond during intense bidding. The diamond is the largest internally flawless fancy vivid pink diamond ever graded by Gemological Institute of America (GIA).
In an interview, Wolf said he had been involved in the diamond business for almost 50 years. “I bought the diamond because I saw an investment opportunity. I don’t think anybody realized the investment opportunity that was there, and I took advantage of that.
“It is one of three most important diamonds in the world. It is the finest pink color diamond that exists and is internally flawless. I would say that it is priceless. This particular color of diamond today sells for $2.5 million per carat. If you multiply that by 60 carats then you see it is worth $150 million. And I paid $83 million.
“You have to remember that diamonds are not just for setting in jewelry. They are also for investment. People want things that can act as a hedge against inflation and currency devaluations.” When asked about the security aspect, Wolf said that it would not be stolen because it was unsellable. He added that he represented a group of investors who hoped to make a good profit on the diamond.
Steinmetz Diamonds cut and polished the stone, which was mined by De Beers in an African state. The stone is fancy vivid pink, the highest grade for the color of diamonds, and it ranks among the top 2 percent in the world. The previous record for any stone sold in auction was in 2010 with the $45.6 million “Graff Pink” diamond. The “Pink Dream” is more than twice the size of the 24.78-carat “Graff Pink.”
The sale at auction of exceptional diamonds may grab the headlines but do the record-breaking items actually have much impact on the business? One New York diamantaire said that the big-sellers helped to put the public spotlight on diamonds, but the glare of publicity is short-lived. “I am not sure that these sales help the diamond industry in general. There is nothing in common between a $83-million sale and our daily business of diamonds that we might sell, for example, from $2,000 to $10,000. These auction sales may lead the general public to think in general about diamonds, but no more than that and not for long.,” he added.
The sale was the highlight of the Geneva auction and of the season and year as a whole for Sotheby’s.
The diamond, originally named ‘‘The Steinmetz Pink,’’ was sold privately in 2007 for an undisclosed amount. The gem has been included in the ‘‘Splendor of Diamonds’’ exhibition at the Smithsonian Institution in Washington. The sale followed a Sotheby’s auction in Hong Kong in October which included white and blue diamonds valued at more than $28 million and $19 million each.
Investment-grade diamonds attract buyers both as status symbols and hedges against volatility in the financial markets. The rarity of the stones, especially the colored ones, and the desire of wealthy investors to diversify their portfolios with tangible assets as a hedge against volatile equity markets, has led them to enter the diamond as investment arena.
Colored stones, which account for about 0.01 percent of mined production, are prized for their rarity and command the highest price per carat. Pink diamonds have set the highest auction prices for gemstones sold at auction. The 34.65-carat ‘‘Princie” fancy intense pink sold for $39.3 million at Christie’s in New York in April.
Pink diamonds are Type II stones that derive their color from the process known as plastic deformation, whereby pressure changes create structural anomalies during the crystal growth. And large diamonds have proven to provide good returns on investment in recent years. A 50.01-carat rectangular cut diamond that was sold at Christie’s New York in 2005 for $4.2 million came back to market last year and sold for $8.4 million. Both times, the diamond was purchased by the jeweler Laurence Graff, who had resold it in the interim.
Such large stones are purchased by individuals and jewelry firms with an “investment element always present,” said Rahul Kadakia, head of jewelry for Christie’s Americas and Switzerland, adding that the fact that Graff was willing to pay twice as much the second time around was “a very clear indication of the direction for the rare diamond market.”
Meanwhile, in October, Sotheby’s Hong Kong sold a 118.28-carat oval brilliant-cut diamond billed as the “greatest white diamond ever to appear at auction” for $30.6 million, while another brilliant-cut diamond weighing 20.05 carats was snapped up for $4.06 million.
“There will always be a market for stones from 1 carat to 10 carats, but at 50-100 carats we are looking at an elite buying field, and the rarer they are, the better they fare,” Kadakia said.
And colored diamonds are continuing to climb in value as the market realizes that the supply is dwindling. Rio Tinto’s Argyle mine, which produces more than 90 percent of the world’s natural pink diamonds, is expected to be closed in 2020. In October, Argyle held its annual sale to invited members of the trade: a single bid per stone for each of the 64 lots on offer. Two price records were broken: the Argyle Phoenix, a 1.56-carat fancy red diamond, fetched the highest price per carat for a diamond ever produced from the Argyle mine, selling for more than $2 million. “In the colored diamond world $1 million per carat is now normal, which in itself is a headline,” Kadakia said.
John Glajz, a diamond wholesaler and seasoned bidder who bought the Argyle Phoenix along with another nine stones, said he was “a little surprised” at how high the prices went. “I expected to win more stones as I bid quite bullishly,” he said. “I have seen the demand for these rare and beautiful stones continue to grow over the past years. The perception that they may become extinct in the not too distant future is a factor.”
Wealthy individuals have been investing in diamonds as a secure asset in an uncertain environment of low interest rates, according to Wealth-X, a consulting and research firm specializing in the habits of ultrahigh-net-worth individuals, those with net worth of at least $30 million.
Many wealthy individuals also own diamond jewelry as fashion items, but as Isaac Wolf said, the trend toward using gemstones to supplement or balance an investment portfolio seems to be growing, as evidenced by the prices of large gemstones. An added component of their investment value is that reselling the stones, even if they have been purchased at a premium price, is “not difficult” given their rarity, Glajz told The New York Times.
“I have bought Argyle tender stones from the secondary market — i.e., from other successful bidders or their clients — and I have been known to repurchase tender stones that I sold to various clients in previous years, and pay substantially more than my original selling price to them,” he said.
The sale of the ‘Pink Dream’ was preceded by that of ‘The Orange,’ the largest fancy vivid orange diamond in the world. The VS1 clarity pear-shaped diamond weighing 14.82 carats far exceeded its pre-sale estimate of $17 million to $20 million at auction in Geneva. It sold for around $36 million, a record for an orange diamond which are rare even by the standards of rarity of colored stones.