Deutsche Bank has raised its forecast for gold and silver prices into 2013 and 2014. The update came as no surprise following the latest stimulus measures announced by the US Federal Reserve, with Deutsche citing increasing demand from central banks across the globe as a critical factor. Deutsche raised its 2013 gold forecast by 3 per cent to $2,113 an ounce and its outlook for 2014 by 11.1 per cent to $2,000/oz. Analysts added that the price of gold could exceed $2,200/oz next year. Good news for gold-bugs, but could prices for gemstones follow suit? We've argued for some time that diamonds and coloured gemstones might eventually become as widely accepted as bullion as a transferrable store of wealth, albeit on a smaller scale.
Admittedly, the fact that each stone is valued according to its individual properties makes it difficult to apply indexed values, and there's always the question of liquidity. But there are moves afoot that could allow investors to gain access to physically-backed instruments. It's been reported that Harry Winston (NYSE: HWD), the world's biggest publicly-listed diamond company, is forming a $250m wholesale diamond fund with Swiss asset manager Diamond Asset Advisors, while New York's SEC is reviewing IndexIQ's application for the first diamond-backed exchange traded fund (ETF). The key requirement for any such fund is that it be of sufficient scale to guarantee liquidity. Investors would also need to have faith in pricing, so a transparent independent valuation process would have to be put in place.
Also see: Aim's sparkling prospects
