Diamond rings and bracelets on display in a show window in Antwerp, Belgium. (Photo by Yuriko Nakao/Getty Images)
Yuriko Nakao | Getty Images News | Getty Images
“Diamonds are a girl’s best friend,” as the old song goes.
However, they are not currently favored by investors as the value of these precious gems has significantly decreased in recent months.
According to the Global Rough Diamond Price Index, diamond prices have dropped by 18% since their peak in February 2022 and have decreased by 6.5% year-to-date.
Market watchers predict that diamond prices will continue to decline.
“A high-quality 1-carat natural diamond that was priced at $6,700 a year ago is now selling for $5,300,” said Paul Zimnisky, CEO of Paul Zimnisky Diamond Analytics.
During the Covid-19 pandemic, diamond prices, along with other jewelry, soared due to increased consumer spending.
However, as the economy reopened, diamond prices started to moderate and experienced a steep decline.
Competition from lab-grown diamonds, a slower Chinese economic recovery, and an uncertain macroeconomic environment are also contributing to the lackluster diamond market.
A diamond necklace in a Harrods department store in London.
Leon Neal | Afp | Getty Images
When people were unable to travel or dine out, they redirected their excess money towards luxury goods and jewelry, according to Ankur Daga, CEO of online jeweler Angara.
Lab-grown diamonds are becoming increasingly popular among consumers.
“In 2020, lab-grown diamond sales accounted for only 2.4% of total diamond sales. As of the present year, they already make up 9.3%,” said Edahn Golan, CEO of Edahn Golan Diamond Research & Data.
Lab-grown diamonds are chemically, physically, and optically identical to natural diamonds. They are considered a perfect substitute and are significantly cheaper.
More people are choosing lab-grown diamonds for their engagement rings due to their indistinguishability from natural diamonds and the opportunity to get a larger diamond for the same price.
Prices of lab-grown diamonds have dropped by 59% in the last three years, primarily due to increased efficiency in production.
Despite the decline in prices, the diamond market could reach a natural floor due to labor costs.
Colorless lab-grown diamonds at the Diam Concept laboratory in Paris, France, on March 16, 2023. Lab-grown diamonds are made in a controlled environment using extreme pressure and heat that recreates how natural diamonds are forged hundreds of kilometers in the earth’s mantle.
Bloomberg | Bloomberg | Getty Images
The middle-market stage of diamond production, which involves cutting and polishing the diamond before creating jewelry, is the most complex and extensive part of the value chain, according to Bain & Company.
Sanctions on Russian diamonds
Market analysts do not expect sanctions on Russia, the world’s leading diamond producer, to cause severe price spikes.
The United Kingdom has led discussions on imposing sanctions on Russia’s state-owned company Alrosa, but according to Zimnisky, Russia has increased diamond sales in recent months to regain lost market share.
Russia, followed by Botswana and the Democratic Republic of Congo, is the largest producer of diamonds.
Russia is expected to have no trouble selling its diamonds despite the sanctions, as major buyers such as India, the UAE, and the EU have not imposed sanctions on rough diamond imports.
India, the US, Hong Kong, Belgium, and the UAE are among the top diamond importers.
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