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Diamonds seen benefiting from US recovery

Monday, 29 Jul 2013 | 7:12 AM ET
Diamonds Are Exposed to US Recovery: Pro
Alison Turner, mining analyst at Panmure Gordon, tells CNBC that diamonds are not dependent on what's going on in China, but more exposed to the consumer recovery in the United States.

A recovery in consumer sentiment in the United States presents attractive opportunities for diamond investors, Panmure Gordon mining analyst Alison Turner said on Monday.

"I think unlike some other commodities where investors are very worried about what's going on in China, diamonds are very, very heavily exposed to the U.S. market and the recovery there on the consumer side," she said, adding, "Just under 40 percent of world demand still sits in the U.S. and that market is recovering quite strongly and certainly we think will continue to do so this year."

The recent slowdown in Chinese growth has fueled steep drops in commodity prices as investors grow concerned over the appetite for precious metals from the world's second-biggest economy.

But the heavy exposure of diamonds in the U.S. market offers investors strong returns at a time when other commodities are too tied to the possibility of a slowdown in China, Turner argued.

(Read More: The world's richest diamond owners)

Since panic selling hit the gold market in April and mining stocks began to sink, diamond stocks have been relatively stable and many investors have begun to increase their exposure.

(Read More: Gold Rout Prompts Shift to Diamond Miners)

Turner admitted that the diamond market was small and niche and that it would probably stay that way, but she said the potential for returns was plain to see. She also argued that the market is far more transparent than it once was, when De Beers in particular sat on "very high stock piles."

"They're still not as transparent as perhaps we'd like as to exactly what they hold, (but) the days of those large stockpiles and those of only a very few players controlling the market have by and large gone," Turner said, "and I think you're seeing a much more transparent and open market."

(Read More: Miner's Shares Surge After It Finds 100-Carat Diamond)