Diamond prices are falling fast – Are they an investment worth making?

Every day there’s news about diamond prices plummeting. Fortune reported that DeBeers was cutting its diamond prices by 40%. ETNOW has reported that diamond prices in India have fallen by 35% in comparison to the previous year’s festive season and that this drop could go even lower.

Diamond prices are falling at never-before-seen rates – but why?

One of the key reasons behind this rapid slide in diamond prices is the increase in awareness of and demand for lab-grown diamonds. Lab-grown diamonds are essentially the same as naturally occurring diamonds in shape, form and chemical composition while costing only 30% of their natural twin. The only differences that show up are certain colour variations that are impossible to catch with the naked eye. While lab-grown diamonds have existed for a while now, the technology to produce them en masse and at a lower cost has finally arrived. So quite naturally – consumers are opting to get a better bang for their buck by opting for lab-grown stones.

So where does that leave diamonds? Are they still an investment?

The truth is that diamonds were never a good investment in the first place. Unlike gold, there’s no internationally standardized value for diamonds as a commodity. Moreover, jewellers tend to add their margins to the diamond’s price along with making charges, GST etc. And unlike gold, diamonds can’t be melted and repurposed. They can only be refitted. So overall, you’ll likely lose 25-50% of your diamond’s value at the time of sale.

As jewellery, there’s no denying their beauty and timelessness. As investments, they’re poor since they depreciate in value. With lab-grown diamond manufacturing in full swing, diamonds aren’t a rarity now, either.

As a result only diamonds that appreciate are rare, large stones – usually coloured. And by large – we’re talking 10, 12 carats – literal pebbles. Those types of diamonds are the ones that end up getting snapped at high prices because they’re one of a kind.

What’s a better investment: Natural or Lab Grown Diamonds?

Neither. Diamonds are not investments. They could be considered assets or heirlooms at best. That said, if you’re looking to buy diamonds, my recommendation is to take the lab-grown route.

Why?

For much of the 20th century, the diamond market was significantly controlled by De Beers through its cartel-like system. This enabled them to manage supply, maintain high prices, and create an aura of exclusivity around diamonds, particularly with their “A Diamond is Forever” campaign. As a result, they could charge ridiculous prices because of this perception of rarity and value that they’d manufactured.

The value of natural diamonds is largely based on their perceived rarity and the cultural importance ascribed to them. The more we, as consumers, consider lab-grown diamonds to be comparable in beauty and quality, yet more sustainable and ethical than natural diamonds, the further the value of natural diamonds will fall.

In conclusion – wear, cherish and enjoy your diamonds. Just don’t look at them as investments!