Diamond and Gold
We discussed wedding jewellery last night. Gold and Diamond are known as brides' favors. Compared between them, gold seems vulgar while diamond looks more elegant. People usually compete their diamonds' sizes too. We have almost abandoned our intelligence in front of sparks of diamond.
In addition, some friends suggested to invest in diamond. 5 carats (or 1 gram) of diamond costs around US$115,000 (US$23,000 per carats) and the same weight of gold costs USD$23 (US$715.50/oz, quoted on 11 May 2006). Yet one of my friends rejected to do so. He raised a question: Why don't most central banks retain lighter diamond reserves as a store of value?
Every organism contains the element of diamond, i.e. carbon. Diamond is formed by prolonged exposure of carbon-bearing materials to high pressure and temperature. The deep region of Earth is favorable for the formation of diamond. In the other words, the amount limit of diamond is not as everlasting as its advertisement claims. In contrast, gold is a chemical element. It is also chemically inertial, unlikely forming compounds with most chemicals. Thus, the supply of gold does not vary naturally.
The most important is the difference of their markets. The extraction of gold is not highly technical and gold can be trade on the open market. These show that gold market is free. On the other hand, the diamond supply chain is controlled by a limited number of dominant businesses such as De Beers. The price of diamond is also dependent to its production such as sizing and cutting. Hence the market of diamond is distorted by its controlled supply. Considering the supply and demand, the value of gold is more reliable.
By the way, have you ever turned on your brain in front of shiny gold and sparking diamond? More importantly, have you ever turned on your brain for your marriage?
In addition, some friends suggested to invest in diamond. 5 carats (or 1 gram) of diamond costs around US$115,000 (US$23,000 per carats) and the same weight of gold costs USD$23 (US$715.50/oz, quoted on 11 May 2006). Yet one of my friends rejected to do so. He raised a question: Why don't most central banks retain lighter diamond reserves as a store of value?
Every organism contains the element of diamond, i.e. carbon. Diamond is formed by prolonged exposure of carbon-bearing materials to high pressure and temperature. The deep region of Earth is favorable for the formation of diamond. In the other words, the amount limit of diamond is not as everlasting as its advertisement claims. In contrast, gold is a chemical element. It is also chemically inertial, unlikely forming compounds with most chemicals. Thus, the supply of gold does not vary naturally.
The most important is the difference of their markets. The extraction of gold is not highly technical and gold can be trade on the open market. These show that gold market is free. On the other hand, the diamond supply chain is controlled by a limited number of dominant businesses such as De Beers. The price of diamond is also dependent to its production such as sizing and cutting. Hence the market of diamond is distorted by its controlled supply. Considering the supply and demand, the value of gold is more reliable.
By the way, have you ever turned on your brain in front of shiny gold and sparking diamond? More importantly, have you ever turned on your brain for your marriage?
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