Here are a few factors to consider when comparing the profitability of investing in gold vs. diamonds:

• Gold tends to be more liquid than diamonds. There is an established global market for buying and selling gold, making it easier to sell at a fair market price when needed. Diamonds on the other hand can be harder to accurately value and sell.
• Gold prices historically tend to rise during periods of economic uncertainty and high inflation. This can make gold a useful hedge against inflation and downturns. Diamond prices are less tied to macroeconomic trends.
• The supply of gold is more constrained than diamonds. All the gold ever mined could fit in about 3 Olympic sized swimming pools. Diamonds are not as scarce.
• Gold mining output is declining, while diamond production may increase with new mine discoveries. This constraining supply can help drive gold prices higher.
• Gold has industrial uses in addition to its status as a financial asset. This provides some baseline level of demand. Diamonds are more discretionary purchase dependent on consumer spending.
• Gold investment bars and coins have lower spreads between buy and sell prices. Diamond margins between wholesale and retail tend to be higher.
• Gold has higher liquidity costs due to storage, transportation and insurance required to protect against theft or damage. Diamonds have lower carrying costs.

Overall gold probably has advantages in terms of liquidity, inflation hedging abilities and supply constraints. But diamonds have merits too in terms of consumer demand growth potential and lower maintenance costs. Investing in both provides some diversification across different types of hard assets. The appropriate allocation depends on an investor’s objectives, time horizon and risk tolerance.