According to the IDEX Diamond Index, a leading online diamond trading platform for professional diamond traders in diamond capitals such as Antwerp, Mumbai, Ramat Gan and New York, diamond prices have fallen by around 14 per cent compared to the same period last year.* This is a drop of more than 33 per cent compared to 2022, when it stood at 158.39 points at the beginning of March, with a price of 105.07 points as of June 14, 2024.*

Evolution of the value of the IDEX Diamond Index over the last 5 years (Source: idexonline.com) *

Synthetic diamonds on the rise

One of the key factors behind the decline in the price of genuine diamonds is synthetic diamonds, which are lab-made and growing in popularity. According to diamond industry analyst Paul Zimniske for CNBC, in 2023, sales of synthetic diamonds will account for more than 18 percent of the global market, up from 2 percent in 2017. This is backed up by figures from Danish jewelry retailer Pandora, which reported an 87 percent year-on-year increase in revenue from the sale of synthetic diamonds, Pandora Lab-Grown Diamonds, in its economic report for the first quarter of 2024. By comparison, rough diamond prices, by contrast, have fallen 15 to 20 percent in the past year, according to Zimnisky's Global Rough Diamond Price Index.* They are now about 25 percent lower than they were at the beginning of 2022.* In practice, this means that natural diamond prices have fallen to an average price of about $4,000 for a 1-carat natural diamond.

Almost indistinguishable

Lab-created diamonds, which mimic natural development in a controlled environment, are almost identical to real diamonds, but take only a few weeks to create. Special equipment is needed to distinguish them. Consumers are reaching for this option mainly because they can afford a "bigger stone for less money," as the price can be as much as 85 percent lower, according to Queensmith.com. In addition, the lab process does not involve unethical mining conditions, which makes the preferences of the younger generation lean towards this option in particular.

No, I prefer gold

The demand of the Chinese market, which is the second largest in the world, also has a significant impact on the price of genuine diamonds. According to Daxue Consulting, a consulting firm that focuses specifically on the Chinese market, the falling interest in diamonds is due to a declining marriage rate and a drop in sales of wedding and engagement rings, as young Chinese prefer personal development and stability, travel and adventure, especially after the relaxation of pandemic measures. Demand is also declining due to a change in the perception of diamonds, which are currently not considered an attractive investment due to the fall in prices. A better alternative is gold, which is associated with wealth, prosperity and happiness in Chinese culture, and whose consumption grew by about 6 percent year-on-year in the first quarter of 2024, according to the China Gold Association. Despite these facts, however, the benefits of synthetic diamonds have been noted in this country as well.

Restoring tarnished lustre

Although the natural diamond industry faces significant challenges, there is still some optimism about future developments. Winters and Anish Aggarwal, co-founder of consultancy Gemdax, agreed in an interview with CNBC that with well-targeted marketing, the diamond industry can regain its lustre. Aggarwal further added that there is a need to create a desire for diamonds, similar to that of luxury handbags or watches. This is the route taken by companies such as De Beers and Signet Jewelers, which, according to PR Newswire, partnered in May to increase demand for genuine diamonds. Meanwhile, Russia is the world's largest producer of rough diamonds, with nearly 42 million carats mined in 2022; conversely, if you want to pay as little as possible for diamonds, you'll get the best price in Dubai.

Downside predictions

Despite the fact that artificial diamonds have gained in popularity, experts expect them to see a more significant drop in prices in the near future. Zimnisky told Business Insider the reason cited an increasing oversupply. While he didn't specify any numerical estimate, he said it could be almost the same price drop as in 2023, which Tenoris, an analyst firm, estimated to be around 20 percent in the 12 months to November. Zimnisky also added that traders are likely to cut back on trading synthetic diamonds next year and return to offering natural ones. Diamond Standard's CEO, Cormac Kinney, predicts an even more significant price drop of between 50 and 80 percent.1

The diamond giant's decline

The shift in consumer preferences is underscored by the weakening of diamond giant De Beers, which, according to Bloomberg, cut diamond prices by 10 percent at the beginning of the year and by 25 percent for diamonds in the "select makeables" category, which can be broken down into smaller gems. Also negative news for De Beers is the decision by its majority shareholder Anglo American to divest their subsidiary. This is to be done as part of Anglo American's restructuring following the rejection of a takeover bid from Australia's BHP and an attempt to adapt to shareholder demands, focusing mainly on copper and iron ore mining.

Olivia Lacenova, principal analyst at Wonderinterest Trading Ltd.

* Past performance is no guarantee of future results

[1] Forward-looking statements are based on assumptions and current expectations, which may be inaccurate, or on the current economic environment, which may change. Such statements are not guarantees of future performance. They involve risks and other uncertainties that are difficult to predict. Results may differ materially from those expressed or implied by any forward-looking statements.