Diamonds are woven through the tapestry of human history. The ancient Greeks were enthralled by their remarkable hardness. The Koh-i-Noor alone has been at the centre of invasions, murder, superstition and larceny. Millions of marriages have been launched using diamonds as the symbol of their everlasting lustre.
So the idea that diamonds might somehow lose their value seems unnatural. And yet prices are falling fast and show no signs of stopping. Natural diamonds cost 26% less in shops than two years ago, a drop during a time of high inflation that would be extraordinary were it not dwarfed by the poor fortune of their identical twins, lab-grown diamonds, which are now 74% cheaper than in 2020.
It may not be long until Paul Simon’s girl with diamonds on the soles of her shoes is simply looking for practical footwear.
“It’s a bad time to buy a diamond,” said a jeweller this weekend in Hatton Garden, the centre of the London diamond trade. “They’ll probably be cheaper in a few weeks.”
De Beers, the biggest name in diamonds, reported last month that it began 2024 with a huge $2bn stockpile of diamonds and had not managed to shift it by the year’s end. The company has cut production in its mines by 20%, and its owner, Anglo American, has put it up for sale.
There are several reasons behind the dramatic falls, according to Edahn Golan, managing partner of Tenoris, which tracks diamond retail prices. “After Covid, there was a burst in demand for diamonds,” he said – part of the “revenge spending” that led to the post-pandemic boom in luxuries and rescheduled weddings. After that huge demand was satisfied, there was a decline. But the question is: why is it continuing?
Lower demand in China, the gloom hanging over the global economy and fewer marriages are big factors, but the biggest change is the emergence of lab-grown diamonds, created in plasma reactors. They used to take weeks to make but can now be grown in a few hours, compared with billions of years for natural stones.
Their provenance is also much easier to trace than mined diamonds, which means lab-grown are seen as more ethical by millennial customers. Synthetic diamonds now account for 45% of the bridal jewellery market – a big blow for the likes of De Beers.
Tenoris tracks diamond prices in more than 2,000 shops across the US. The average price of a one carat natural diamond peaked at $6,819 in May 2022 (£5,422.67 at the time) and by last December had fallen to $4,997 (£3,923.83), a 26.7% fall.
The equivalent lab-grown diamond price is down from $3,410 (£2,599.38) in January 2020 to just $892 (£700.43) in December, a 73.8% fall.
In practical terms, this mostly affects someone looking for a statement sparkler, who can now afford to go bigger than ever before. “They are much bigger stones,” said Robert Willis, a director at E Katz & Co, the oldest jeweller in Hatton Garden. “About two or three times bigger,” he says, making a hole with his fingers about the size of a 10p piece. “In lab-grown, three carats is normal, even four or five.”
Customers are still spending big, Willis said, budgeting between £5,000 to £8,000 for a ring, nearly double what they spent 10 years ago, and many continue to choose natural diamonds.
Geoffrey Farrow at Raphael, a jeweller on the other side of the street, can only just bring himself to sell lab-grown diamonds. “They are synthetic,” he said. “Lab-grown sounds exotic, but it’s created – they make it by the buckets. There’s no history to it. The price is going to go down further and further.
“It makes the stone that much cheaper, and people have the illusion that being big is something special. It’s not. It’s quality that you want.”
De Beers is pushing this message, with a marketing campaign promoting natural diamonds, and Golan believes that red carpet bling at the Oscars may see more natural diamond jewellery than lab-grown.
“At the Emmys, unlike in the past year or so, there were a lot less celebrities with lab-grown on them – if it’s from a lab-grown company they will say, because they’re trying to promote the product,” he said.
The diamond trade has overcome other shocks in the past. “From medieval times, diamonds all came from India – a few from Borneo but mainly India,” said Jack Ogden, a historian of jewellery. “Then they discovered a source in Brazil.”
The discovery was announced in the London press in 1725, and within eight years, the price of rough diamonds had fallen by two-thirds.
“Diamondeers in Lisbon were unable to sell their stock because the fear was that diamonds were as common as pebbles,” Ogden said. “But a famous London jeweller called David Jeffries said that, by 1750, they were back to normal.” A similar shock came with the discovery of diamonds in South Africa in 1867.
“That very luckily coincided with the rise of a whole new wealthy class in North America – the railroad people – and they became the big diamond buyers.”
Modern firms pulled off a similar trick by selling diamonds to China, Ogden said. “In the Far East, diamonds were never a traditional thing, and now you don’t get married in Shanghai unless you have a diamond engagement ring. It’s very clever marketing.”
It’s a trick that may have run its course. The last remaining global market would be Africa, where diamonds have “too bad a reputation”, Ogden said. “I’m not sure they’ll be convinced that buying diamonds is good.”
“It’s a very artificial market,” Ogden said. “They’re very valuable because people want to pay money for them. People want to pay money for them because they’re very valuable.” This self-sustaining loop, he added, may not always continue to sustain itself.
