On a global basis, gold has always been considered as a hedge against inflation; no need to further go into details. But has gold performed against fancy color diamonds, quoted by Fortune to replace gold as the next hedge. Well, then let’s see how gold has performed since it was decoupled from the dollar by the Nixon administration back on August 15, 1971. Back then it was given a $38 value. It was re-priced to $42 in 1973. By doing so, it allowed countries to print more of their money resulting in higher inflation but also economic prosperity.
I wanted to see how correlated Fancy color diamonds are compared to Gold, so I decided to graph the five main colors I consider as investments in Fancy Color Diamonds with that of gold.
Since I review the colors also broken down into size group, I decided to cover the mainstream sizes which are the 1-2 carat (1.00ct-1.99ct). I cover Fancy Intense Pink, Fancy Vivid Pink, Fancy Intense Blue, Fancy Vivid Blue, Fancy Vivid Yellow. I will choose for each 5 points, earliest and latest with 3 more points in the middle as I always do to show both up and down patterns.
From the graph, we can see that the color that had the most correlation to gold is no other than Fancy Vivid Yellow. There is a low correlation between Gold and Fancy Intense Blue.