Is Gold Better than Diamonds? Mr. Goldfinger was correct!


When asking the question is gold better than diamond we are likely thinking about which makes the best investment. In this article, we’ll look at the ups and downs of buying one over the other.

Gold is better than diamonds because gold’s value is easily established and it may be converted to cash quickly and easily. Diamond prices, however, are far less transparent, in addition, diamonds can be difficult to sell. Gold has traditionally been a safe haven when financial stocks take a tumble.

Both gold and diamonds are desirable objects and having either would be a good investment but is gold better? Let’s take a look at what separates them.

Gold Bars

Why Gold Is Better

When we think of gold, some of us may think of the fictional James Bond character – Mr. Goldfinger, whose love for gold led to his destruction. Or you might think of the great gold rush of the mid 19th century. Gold captured the attention of many, with the posters promising great wealth no matter what your background was. Gold could be found glittering in the river beds in California, Colorado, Georgia, and North Carolina. All you had to do was grab a gold pan and turn up.

But why is gold revered? All precious metals are valuable due to their rarity. Gold has a concentration in the earth’s crust of 4 parts per billion. Not as valuable or as rare as Diamond but still seen as a good investment option, especially in times of financial flux. 

Gold is valued by how ‘pure’ it is. 24 Karat being the purest. Meaning no other metals are in 24Karat gold. 18 Karat gold is 75% gold and 25% other metals (usually copper or silver).

Because gold is a commodity and traded openly on the world markets, its price fluctuates, but the price is always available as too are buyers.

If we look at the price of gold over the last 50 years the increase is quite phenomenal. And when comparing it to stocks over the same period, the results are eye-opening. Take a look at the chart below to see what a fictional $10,000 invested in each would be worth today.

$10,000 Invested 1970Value Today 2022Gain %
Gold (285 ounces)$514,0005200%
Diamonds (1.45 carats)$17,468174%
Dow Jones Industrial Average (Index at 6,000)$60,000600%
Diamondse.info

An ounce of gold has increased in value by 5194% in 52 years.

YearOne Ounce Gold
2022$1818
2017$1260
2012$1668
2007$696
2002$310
1970$35

Why Diamonds Aren’t As Good As Gold

The most expensive diamond is the Koh-i-Noor (price unknown) at 105 Carats, the next most expensive is The Cullinan at $400m, less valuable, yet it’s a much bigger diamond (3100 carats).

So what’s going on, why is this? Diamonds are valued by the 4 C’s. Color, Clarity, Carat, and Cut. When all of these align, the most valuable diamond is the stone that achieves the top grade of each category. 

Color is actually the lack of color. Starting at D and going to Z, D being completely colorless and the most desirable. Only trained diamond experts can tell the subtlety of the different color grades as most differences are not visible to the human eye. 

Clarity is scaled from Flawless to Included. Flawless Diamonds have no blemishes or inclusions under magnification. Included are diamonds with obvious defects under magnification which would affect the sparkle of a diamond. 

The cut is the hardest area of Diamond grading to analyze. Cut determines how bright a diamond will shine and reflect light. They are assessed under three heading

Brightness, which reflects white light, followed by FIre, which reflects a rainbow of light, and Scintillation which is the amount of sparkle given off.

Carat is the weight of a diamond. Most diamonds on sale are less than 1 carat and when assessed they are awarded points. Two diamonds of the same carat doesn’t necessarily mean that they are worth the same amount. Remember the other C’s might be totally different. Unlike gold, every diamond is unique.

GIA – Gemological Institute of America

Diamonds on black background

All diamonds are certified by GIA – Gemological Institute of America. Without certification, a diamond is not a diamond. With the introduction of Lab diamonds (man-made in a lab from a seed), diamond certification became necessary as proof of authenticity. Natural stones are worth a lot more than their lab-grown cousins.

The GIA offers an independent evaluation of the color, cut, clarity, and carat of your stone. They won’t put a monetary value on a stone, but once marked by the GIA the diamond is a lot easier to value and sell.

The problem with diamonds is, they aren’t traded on an open exchange. Unlike gold, where you can check gold prices on your smartphone in seconds.

Diamonds are much harder to value and finding a willing buyer for that reason is a lot harder. So how do I know how much a diamond is worth, I hear you ask? Well, diamonds are a little like art, if someone wants it badly enough and they’re willing to pay the ticket – Sky’s the limit.

Before buying a diamond insist on seeing all the paperwork attached to the diamond. If it hasn’t got a GIA certificate, I’d walk away. 

Purchasing Gold and Diamonds

One of the biggest differences between gold and diamonds is gold availability. Gold as you know can be purchased as a stock (paper certificate) or as bullion (physically held). The purity of gold is paramount and gold bars/bullion must have 99% purity and must be stamped to be authentic.

You must consider whether it would be easier to just buy paper gold known as ETF (Exchange Traded Funds) or whether you wish to hold gold bullion personally. Gold ETF is an index that tracks the gold price tick by tick.

Each has its drawbacks. Holding gold physically presents challenges. You will have to have a secure location, be it a safe at home or a security deposit box at a bank. And even then is it safe? Don’t forget the delivery and transportation of the bullion to and from the bank, broker, etc.

You will need insurance for theft or natural disaster, and you may need extra insurance if you are storing gold externally. And then you have to disclose that you have gold, and that then becomes a bigger security issue.

Buying paper gold comes with less risk and is arguably safer than bullion. But paper ownership is there in black and white, meaning there is a track record of your ownership and that might not suit every buyer’s needs. Bullion, on the other hand, has no third-party paperwork attached to it and so no one needs to know that you have it, unless you tell them.

Diamonds are not widely available. You can purchase certified diamonds from jewelers and keep them in a safe place, either at your home or in a security deposit box but they are a tangible item and must be stored somewhere, and like physical gold, diamonds will need to be insured.

Many gold owners simply hind their gold bars in plain sight, paint a bar of gold black and use it as a doorstop and who would question it. Unfortunately the same can’t be done with a diamond.

They can however be worn as jewelry which gives an added personal value to them, but not necessarily a monetary one. In fact, mounted diamonds are not as valuable as single gems. Diamond jewelry already has an inflated cost added by the shop. The true value of a diamond in a ring or other piece is much less than the price you may have paid.

Your piece of jewelry would have to be privately assessed to find the true value of the diamond.

Pros and Cons of Gold / Diamonds

Firstly let’s look at gold.

The pros of owning gold

  • Price
  • Gold has a fixed price
  • Purity
  • It can be tested for purity and holds a stamp to prove it
  • Safe
  • Bullion can’t be hacked (like crypto)
  • Privacy
  • No one need know that you hold gold bullion
  • Saleable
  • Gold is saleable worldwide, no matter where you are it has a commodity value.

The cons of owning gold

  • Security: It needs to be stored
  • Safety: It needs to be insured
  • Investment: It doesn’t pay a dividend.
  • Tax: The Capital Gains on gold is 28% – stocks are 15%

Diamonds:

The pros of owning diamonds

  • Value: It can be worth more if the demand is high
  • Durability: They last forever
  • Investment: They rarely decrease in value

The cons of owning diamonds

  • Liquidity: They are hard to sell in a hurry
  • Jewelry: Worthless if mounted
  • Paperwork: They need to be certified
  • Security: They need to be stored safely
  • Theft: They can lead to a security risk if it’s known you have them

Why Do People Buy Gold or Diamonds?

Gold, although not the rarest of precious metals, is probably the most sought after. It has been cherished and used as currency for millennia. Ancient necklaces and rings, dating back to the pyramids and before have been discovered meaning our ancestors and forefathers knew the value of the shiny unbreakable metal.

The reasons we buy gold are varied.

  • Like to have something tangible
  • Secrecy plays a part – no one needs to know that we have it.
  • Easily pass wealth to future generations – unless you sell it there is no tax liability
  • Gold is much easier to manage than cash – bundles of dollars pose a much greater headache than a bar of gold
  • Diamonds for jewelry – not advisable if diamonds are bought as an investment

In Conclusion

So there you have it, I’d buy gold. Why? because of gold’s performance over the last 50 years, because of how easily it can be liquidated, the flexibility of ownership (paper or physical), and most of all because there is a little Goldfinger in all of us.

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John Cunningham

John is a writer, classic car and whiskey lover, men's shopping enthusiast and self appointed DIY expert. His greatest passion is repairing in the workshop, making old classics look and run like new again!

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