For decades, diamonds have been the darlings of the luxury market. However, in the past year, the price of certified diamonds has plummeted by 35% to 40%, prompting many to question whether the era of exorbitantly priced diamonds is coming to an end.
While the diamond market cools, the gold market heats up.
According to the Beijing News, a netizen named Xiao Tang told reporters, "I'd rather buy gold." Xiao Tang feels that diamonds lose their value as soon as they're purchased, so a moissanite ring suffices for a wedding. For her, buying a diamond ring is more about the ceremonial significance of marriage, and she rarely wears it post-wedding. She believes that the security gold offers is unmatched by diamonds.
End of the "Pricey Myth"?
Antwerp, Belgium, known as the "Diamond Capital of Europe," boasts a globally renowned diamond street. This street is home to four diamond exchanges and thousands of diamond wholesalers. Here, a vast number of diamond transactions are completed annually. Kevin, a diamond wholesaler from India, shared that the price of certified diamonds has dropped by 35% to 40% in the past year. Diamonds ranging from 0.50 to 3 carats have been hit the hardest, with sales dropping by 30% to 35%.
Moreover, natural diamonds are facing competition from lab-grown diamonds. A high-end diamond store owner revealed that, unlike in the past, over half of their customers now opt for lab-grown diamonds.
In the past year, due to rising living costs and a downgrade in consumption, consumers in many European countries have become less discerning about the quality of diamond rings. Lab-grown diamonds are rapidly gaining market share over natural diamonds.
Fleischteg, a director of the Belgium Diamond Exchange Federation, stated that two years ago, lab-grown diamonds were 40% cheaper than natural diamonds. This gap widened to 60% and has now reached 70% to 80%, even 99% in some cases. He humorously remarked that in the future, buying soap at a supermarket might come with a free diamond.
According to data compiled by global jewelry industry analyst Tenoris, the market share of lab-grown diamonds has been steadily increasing since 2021. As of July this year, it reached 49.9%, nearing the critical 50% mark, and is expected to rise further.
This year, the price of natural diamonds has seen a significant drop, leading many to wonder if the era of exorbitantly priced diamonds is fading.
Data compiled by independent diamond analyst Gennisky shows that so far this year, the price of natural diamonds has fallen by 13.6%. Compared to previous historical highs, it has retracted by 24.6%.
Furthermore, De Beers, which has monopolized the natural diamond supply chain, has also felt the softening demand for natural diamonds. In August, during De Beers' seventh sales cycle of the year, the company sold natural diamonds worth $370 million, a year-on-year decrease of 42% and a month-on-month decline of 10%. This marks the company's fourth consecutive month of declining sales.
Over the past year, De Beers has reduced the price of its mainstream products, 2 to 4-carat natural diamonds, by 40%. Industry insiders believe there's still room for prices to fall, predicting a further decline of 20% to 25% in the worst-case scenario over the next year.
Russian Diamond Giant Halts Sales
On September 20, media reports revealed that Alrosa, one of the world's largest diamond giants, announced in a memo to clients that it would suspend rough diamond sales in September and October. The company believes this move will address the supply-demand imbalance seen in recent months.
Alrosa, which supplies about one-third of the world's diamonds, was on par with De Beers, which had a monopoly until the beginning of this century.
For now, De Beers has no plans to cut sales volumes. Instead, it's offering buyers more flexibility. Insiders revealed that De Beers has allowed buyers to defer up to 50% of purchases of diamonds over 1 carat for the rest of the year. The company also informed clients that they aren't obligated to buy some of the smaller diamonds.
Data shows that the International Diamond Exchange diamond price index peaked at 158 in March 2022 but has since fallen to around 110, a nearly 30% drop and a new five-year low. Industry insiders cite persistent high inflation in many countries as a significant factor behind this trend.
Earlier this month, the Indian Diamond Association called on miners to limit supply. About 90% of the world's diamonds are cut, polished, or traded by the Indian Diamond Association.
Not a Safe Investment: Netizens Say Buying Diamonds is a "Tax on Intelligence"
Apart from the impact of lab-grown diamonds, the depreciation of natural diamonds is another significant reason for their continued price decline.
Many users on social media platforms shared their experiences of significant losses when trying to resell their diamond jewelry. Some mentioned that a ring purchased for 8,000 yuan was only worth 600 yuan upon resale, while a 30,000 yuan ring was worth just 2,000 yuan five years later. Some even joked that the most valuable part of their 10,000 yuan diamond ring turned out to be the 18k gold setting. The high purchase and low resale prices of diamonds led many netizens to quip that buying diamonds is akin to paying an "intelligence tax."
In response to the low resale prices in the secondary diamond market, a jewelry appraiser from a Henan-based jewelry store explained that the high purchase price of diamond rings is due to effective advertising by retailers. The appraiser added that diamonds are no longer scarce, and their prices have been inflated by the market.
Additionally, a recent survey in Shenzhen's Shuibei jewelry market revealed that young consumers prefer gold jewelry over diamond jewelry because gold retains its value better. On-site observations showed that a 0.5-carat 18K white diamond ring priced at 57,000 yuan was actually selling for just 25% of its marked price. Moreover, different stores offered varying prices and discounts.
Some stores also mentioned that the resale price of natural diamonds would be discounted. On the other hand, many gold jewelry stores displayed a gold jewelry buyback price of 460 yuan, which is the day's purchase price minus 10 yuan, and offers instant cashback.