Investing In Diamonds Vs Gold: Which Shines Brighter In 2025?
Gold has long been the go-to asset for Indian investors—valued not just for its beauty, but for the financial security it offers. For generations, buying gold was not just about wedding jewellery; it was a thoughtful move rooted in culture, tradition, and long-term wealth preservation. But in a world of evolving investment choices and rising aspirations, a new debate is gaining ground: investing in gold vs diamonds. Which truly stands the test of time?
While Indians have always adorned themselves with diamond jewellery, viewing these sparkling gemstones as investment options is a recent shift in thinking.
In this article, we will explore a question that’s gaining popularity among modern investors: Which is the better investment—gold or diamonds? We’ll break down the pros and cons of investing in diamonds versus traditional gold holdings to help you make an informed choice. Let’s dive in.
Diamonds VS Gold As Investment Assets
Both gold and diamonds are precious assets having value. Gold is a commodity with standardised pricing and global benchmarks, while diamonds are luxury goods with values that vary dramatically based on the 4Cs– cut, colour, clarity, and carat. This distinction is not just academic, it impacts everything from liquidity to value appreciation.
What makes gold investment in India 2025 so appealing is this standardisation. One gram of 24K gold in Mumbai is essentially identical to one gram in Delhi or Chennai. But with diamond investment in India, each stone is unique, making the investment landscape far more complex.
Both assets are priced differently. A 1-carat diamond in India costs approximately between INR 2 to INR 10 lakh with SI1-SI2 Clarity and H-J Colour quality diamond being on a lower range of this spectrum, and VVS1-VVS2 Clarity and D-F Colour quality on the higher range1. The same amount could buy you gold between 20 grams to 100 grams.
As a result, between investing in diamonds vs gold, which one will grow your wealth more effectively over the next five years? That's what we are going to talk about next.
Liquidity And Resale Value Of Gold And Diamonds
Which is easier to sell in India?
Gold wins the liquidity battle hands down. Your gold jewellery or coins can be converted to cash within hours at thousands of jewellers or banks across India. The same cannot be said about diamonds.
Gold maintains its value when resold (minus making charges) based on its weight and purity. However, for diamonds, you hardly get 20-60% of what you paid, and finding a buyer could take weeks or months2.
This could be because everyone understands gold. Its value is quoted daily, and it's been a trusted store of wealth for generations.
Transparency in pricing and buyer availability
Gold prices are transparent and universally understood. Turn on any financial news, and there is the gold rate for the day. For diamond pricing, it’s a different story altogether.
The diamond investment market lacks the price transparency of gold. Even with certification, valuing a specific stone requires expertise that most Indians do not have. Also, while gold buyers are everywhere, diamond buyers with both expertise and cash ready are much harder to find.
This opacity in pricing gives dealers significant advantages over individual investors when it comes time to sell.
Market Trends In Gold And Diamond Prices
Gold has been on an impressive run. Prices have surged over 200% in the last 10 years, with a particularly strong 30% jump just since Akshaya Tritiya 20243. The yellow metal was trading around INR 73,000+ per 10 grams last year and has now rocketed to INR 1 lakh+ levels in May 2025.
Between investing in diamonds vs gold, how do diamonds compare? As per the Knight Frank Luxury Investment Index 2024, natural diamonds have given an average return of 8% annually in the last decade4.
Geopolitical tensions, inflation concerns, and central bank buying have all contributed to an increase in gold prices. Diamonds lack these macroeconomic drivers, responding more to consumer demand patterns and marketing efforts by major industry players.
Taxation And Regulatory Landscape
How gold and diamonds are taxed in India
Both gold vs diamond as investment options face similar taxation structures.
Both gold and diamond jewellery investments’ tax structure includes a 3% GST at purchase5. When sold, gains on gold held for over 24 months are taxed as long-term capital gains at 20% with indexation benefits and 12.50% without indexation benefits6.
Impact Of GST And Capital Gains
GST has standardised the taxation approach for both gold and diamonds, eliminating the state-by-state variations that previously existed.
For capital gains purposes, gold has an advantage – its standardised pricing makes calculating purchase and sale values simple to understand. For diamonds, this lack of price transparency can become a tax reporting headache.
Another important factor is that gold has its digital alternatives like Sovereign Gold Bonds (SGBs), which offer significant tax advantages over physical gold, with tax-free capital gains if held to maturity, plus a 2.5% annual interest. The same is not available for diamond investment in India.
Investment Potential: Diamonds vs Gold
1. Value Appreciation Over Time
Gold has been known to deliver consistent returns to investors.
For example, from 2000 to 2025, gold has increased from INR 4400 to INR 1 lakh, a 2173% increase7.
On the other hand, diamonds have appreciated at a more modest but still respectable 5-7% annual rate. However, rare colored diamonds like pinks, blues, and reds have outperformed well, appreciating up to 9-12% annually8.
These ultra-rare stones have become alternative investments for high-net-worth individuals seeking portfolio diversification.
2. Volatility And Stability
Gold prices can swing dramatically due to macroeconomic factors and overall market volatility. This fluctuation creates both opportunities and challenges for investors.
Diamonds, particularly investment-grade stones, tend to show more price stability. They rarely experience sudden price drops, but also do not enjoy the rapid appreciation gold can see during economic crises.
3. Accessibility For Retail Investors
Gold wins decisively on accessibility. Retail investors can start with as little as INR 5000-10,000 through digital gold options or small denominations of physical gold. The market is well-established, with multiple entry points from jewellery to coins to ETFs.
Diamonds present a much higher barrier to entry. Investment-grade diamonds typically start at INR 2 lakh for stones that might appreciate meaningfully. Below this threshold, the stones are generally too common to appreciate significantly.
For the average retail investor, this accessibility gap makes gold a far more practical choice for portfolio diversification.
Risk Factors And Market Volatility
Every investment carries risks, and diamond and gold investment in India 2025 are no exception.
For gold, the primary risk is market volatility driven by macroeconomic factors. Interest rate decisions, particularly by the US Federal Reserve, can send gold prices swinging in either direction. Predicting these moves requires global economic awareness that many retail investors lack.
Diamond risks are quite different. First, there's the authentication challenge, ensuring what you're buying is genuine and correctly graded. Then there's liquidity risk, and finally, there's fashion risk, which includes changing consumer preferences.
Portfolio Diversification And Strategic Considerations
Balancing Investments
How should an investor approach these glittering options? The answer depends largely on your investment goals, risk tolerance, and time horizon.
For most Indian investors, allocating 5-10% of a portfolio to gold makes sense as a hedge against inflation and economic uncertainty. This could be through a mix of physical gold and paper gold options like Sovereign Gold Bonds.
Diamonds, given their higher risks and entry barriers, should represent a smaller allocation, perhaps 1-3% of a portfolio, and only for investors with higher net worth and longer time horizons.
Remember, diversification is about correlation. Gold typically performs well when equity markets struggle, making it a useful counterbalance in a mixed portfolio. Diamonds do not reliably show this inverse correlation, limiting their effectiveness as a pure diversification play.
Gold or Diamonds: Which Suits Your Investment Style?
So, who should consider investing in gold, and who might benefit more from diamonds? Let’s break down which type of investor each asset best suits.
Gold | Diamonds |
Conservative investors seeking wealth preservation | High-net-worth individuals seeking unique alternative investments |
Those wanting inflation protection | Investors with specialised knowledge of gemology |
Investors looking for portfolio diversification | Those with very long investment horizons (10+ years) |
People with a cultural affinity for gold | Collectors who derive personal enjoyment from ownership |
Conclusion
When weighing investing in diamonds vs gold in 2025, gold continues to shine brighter for most Indian investors thanks to its unmatched liquidity, transparent pricing, and impressive returns, making it the best precious metal to invest in India.
However, diamond investment in India can complement portfolios for high-net-worth individuals who have longer time horizons. The most suitable approach would be to include both in your portfolio for diversification as per your goals, available capital, and risk appetite.
Frequently Asked Questions On Investing In Diamonds VS Gold
1. Is gold a better investment than diamonds?
For most Indian investors, yes. Gold offers greater liquidity, price transparency, and lower entry barriers than diamonds. However, exceptional diamonds, particularly rare colored stones, can sometimes outperform gold for knowledgeable investors.
2. Do diamonds appreciate in value over time?
Yes, but not all diamonds appreciate equally. Investment-grade diamonds (typically D-F colour, VVS clarity, excellent cut, and 1 carat+) have historically appreciated at 8% annually. However, smaller, lower-quality diamonds may actually depreciate, making diamond selection crucial for investment purposes.
3. Why are diamonds considered less liquid than gold?
Diamonds lack standardisation, making each stone unique based on the 4Cs (cut, colour, clarity, carat). This uniqueness complicates pricing and requires specialised knowledge to value correctly. Additionally, the buyer market for investment diamonds is much smaller than for gold, with fewer established platforms for quick transactions.
References:
1.Giva Blogs, accessed from: https://www.giva.co/blogs/tales/a-comprehensive-guide-on-1-carat-diamond
2. The Diamond Pro, accessed from: https://www.diamonds.pro/education/diamonds-value/
3. The Economic Times, accessed from: https://economictimes.indiatimes.com/markets/commodities/news/your-grandmother-was-right-gold-prices-have-zoomed-200-in-10-years/articleshow/120729127.cms?from=mdr
4. Knight Frank, accessed from: https://content.knightfrank.com/resources/knightfrank.com/wealthreport/the-wealth-report-2024.pdf
5. India Filings, accessed from: https://tinyurl.com/bdd84na8
6. Livemint, accessed from: https://www.livemint.com/money/ask-mint-money/planning-to-sell-your-gold-diamond-silver-and-other-jewellery-know-income-tax-rules-here-11736309500537.html
7. Francis Alukkas, accessed from: https://francisalukkas.com/blog/gold-price-history-in-india
8. Capitalize Things, accessed from: https://www.capitalizethings.com/investment/diamonds/
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