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Could diamonds be the new gold?

A small number of investment professionals around the world are competing behind the scenes to turn the gem into a commodity that would be available to investors in the way that gold has been traded through funds on exchanges.

Trading in diamonds is limited in the United States to the retail market for engagement rings and other jewellery and the back-room bargaining among merchants in places like Manhattan’s diamond district on West 47th Street.

But financial industry players in New York, London, Switzerland and Israel say there is an opening to provide reliable public access for the growing universe of investors who have been willing to sink money into funds backed by exotic assets like palladium and silver. Those players have turned a gold-backed fund, the SPDR Gold Shares, into one of the world’s largest exchange-traded funds, with a market capitalisation of about USD70 billion.