This is a concern as Russia, Sierra Leone, and other hostile countries hold a large share of diamonds. Will this fund future nukes and terrorist organizations?

By Christopher Donville and Ron Day

Sept. 30 (Bloomberg) — Demand for safe-haven investments and a dearth of significant new mines will lift diamond prices after the world’s financial markets stabilize, Harry Winston Diamond Corp. Chief Executive Officer Robert Gannicott said.

Global supplies of rough diamonds are unlikely to meet expected demand as purchases rise with wealth in Russia, the Middle East and elsewhere in Asia.

“There’s a lot more upside in diamond prices than the public market appreciates,” Gannicott said yesterday in an interview in New York. “I don’t think the supply-demand gap is understood very well.”

Gannicott, 61, is positioning Harry Winston to benefit from heightened price competition for diamonds. Since early 2007, the price of some 3-carat diamonds have risen fourfold on speculation demand would outstrip supply.

“If you bought good quality stones five years ago, you’re looking at a much bigger win than anything in the stock market,” Gannicott said.

Harry Winston fell $2, or 13 percent, to $13.28, yesterday in New York Stock Exchange composite trading. Shares of the Toronto-based company plunged to their lowest since Jan. 14, 2002.

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