U.S. Markets closed

Diversify Hard Asset Exposure with Precious Stones ETF


Hard assets are strengthening as the Fed keeps juicing the market. While precious metals are the typical choice, exchange traded fund investors can also consider diamonds.

The PureFunds ISE Diamond/Gemstone ETF (GEMS) has gained 2.7% over the past month while precious metals and other miner sectors were in the negative. [Gemstone Miner ETF Could Be Diamond in the Rough]

The outperformance in the diamond industry could continue as demand outstrips supply, especially in Asia where the emerging middle class grow to enjoy the finer things, according to Zacks.

In India, diamond demand surged as an alternative asset due to higher import taxes on gold – uncut diamonds do not attract a levy in India.

Research firm Bain & Company estimates global demand to rise 5.9% annually through 2020, whereas production will only increase 2.7% annually. Bain & Company also points out that the diamond industry came out of the global downturn because high-end customers remained relatively immune to the receession.

The GEMS ETF tracks companies engaged in exploration, production or sales of precious stones.

The fund has 24 holdings and the top components include Chow Tai Fook Jewellery 8.9%, Anglo American 8.0% and Petra Diamonds 7.2%. The ETF also leans toward smaller companies, including 28.3% in micro-caps, 32.4% in small-caps and 22.2% in mid-caps.

Country allocations include UK 28%, Hong Kong 25%, Canada 20%, US 15%, Japan 7% and Sinapore 5%.

Potential investors should be aware that the fund has $1.1 million in assets and trades with an average daily volume of 5,326, so make sure to utilize limit orders to take better control over trades.

PureFunds ISE Diamond/Gemstone ETF

For more information on miners, visit our metals & mining category.

Max Chen contributed to this article.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.