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How to Play Diamonds With ETFs

NEW YORK ( TheStreet) -- As the global economy recovers and the middle class widens in developing nations, the outlook for the diamond sector is likely to be promising.

The rough diamond market is already starting to rebound and prices are close to levels seen before the global financial meltdown that forced demand for diamonds and jewelry to dwindle dramatically down. In fact, some analysts and diamond experts suggest that valuations of diamond stocks appear to be relatively cheap.

Another factor that is likely to benefit the diamond markets includes an increase in willingness of investors to provide financing to diamond mining and exploration companies. Additionally, an expected rebound in consumer spending will likely result in increased demand for jewelry and bolster revenues for diamond producers. Most notably, demand is likely to increase in nations like China, India and Brazil as incomes start to increase and consumers demand the finer things in life.

Diamonds are a commodity that are not traded in the futures markets and are difficult to get direct exposure to. Companies like DeBeers are a great way to gain exposure to the shiny, sought-after gems; however, it is not publicly traded. To gain exposure and play the diamond markets, one could take a look at mining giants Rio Tinto (RTP) and BHP Billiton (BHP), which have diamond divisions.

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