Diamonds have long been coveted, from Greek mythology to Marilyn Monroe’s Hollywood and De Beers’ astute marketing.

However, due to the recent collapse in pricing, the once-dazzling stones have started to lose their lustre.

“The current softness in natural diamond prices is primarily a correction, following what I would say is a record run up in prices that we saw in 2021 and 2022,” said New York City-based independent diamond analyst, Paul Zimnisky.

Those with the means to do so went shopping when COVID prevented them from having fun.

The demand increased the price of diamonds.

“All of the moons pretty much aligned for diamonds, and it was a really strong period,” Zimnisky said.

“Almost every category of natural diamonds went parabolic to the upside, due to supply shortages, following the stimulus, primarily in the US, during the pandemic.”

According to the worldwide RapNet Diamond Index (RAPI), the cost of a cut, one carat, natural white diamond increased by 5.8% in 2020 and subsequently by 17.4% in 2021.

“Now we’re on the other side of that … we’re experiencing a demand shock in the other direction,” Zimnisky told The Business.

In 2022, prices began to fall; that year, the RAPI erased 10.7% off the price of a one-carat stone.

It has been far worse this year.

A one-carat diamond’s price dropped by twice the amount from January to November of last year, deducting 21.3%.

In less than two years, the cost of a one-carat diamond has decreased by 32% overall.

The cost of a half-carat stone has decreased by over 40%.

“Diamond prices have reacted according to the changing fundamental picture,” Mr Zimnisky said.

The onset of the downturn coincided with rate hikes by central banks.

“Diamond prices certainly are highly correlated with GDP growth,” Zimnisky, a former Wall Street analyst, added.

The downturn in diamond prices has been felt by Perth-based jeweller Rohan Milne, who notes that although there have been “significant drops here,” they haven’t been as severe as in the US.

“They’ve seen upwards of 20 per cent or more drop, potentially, but I think here, we’re probably not seeing such big fluctuations in the price, just because the Aussie dollar has sort of cushioned some of that,” Mr Milne told The Business.

“When the Aussie dollar drops, at the same rate as say, the price of white diamonds in US dollars, we don’t see that big fluctuation because we’re still buying it in US dollars — so that sometimes keeps pace.

“That’s always been the case with gold as well.”

The diamond market has long been characterised by a flight towards affordability, which has led to the growth of lab-grown diamonds, sometimes referred to as synthetic diamonds.

The world’s largest diamond dealer, De Beers, declared in 2018 that it would begin selling the artificial stones.

“The market was quite astonished that here was the company that spearheaded, maintained and promoted natural diamonds, and yet they had a spin-off of the synthetics,” diamond consultant, John Chapman said.

Formerly employed by the Australian diamond company Argyle, Chapman is a physicist and diamond analyzer who is now well-known throughout the world for his proficiency with precious stones.

In the case of the Argyle diamond mine in northern Western Australia, 1.3 billion years ago, a volcano sent diamonds to the surface from hundreds of millions of years ago. After being formed under tremendous pressure at the earth’s core, mined or natural diamonds were buried beneath the surface and later unearthed by miners.

In a few days, synthetic diamonds may be created, and the untrained eye would struggle to distinguish between the two.

According to Chapman, the cost of natural stones has increased because to the growing demand for synthetic stones, which can be purchased for significantly less money.

“It’s compelling for a consumer to be able to have something on their finger or in their ears, which to the unaided eye, or even with an aided eye, you can’t tell the difference. So that’s what the industry is up against”

According to Chapman, the marketing blitz that followed De Beers’ entry into the produced diamond market—the same corporation that came up with the idea that buying a diamond ring should cost two months’ salary—may have been a gimmick.

“There are a few thoughts about what their strategy was there, because they were quite cheap, even for synthetics, they were at the lower end,” he explained.

“There was some speculation that it was a strategy to undermine all the other producers who would have to match their prices, and as a result, probably go broke — and therefore, it might have been a way to destroy the synthetic market.”

Whether the rumours are true or not, the price of lab-grown diamonds has indeed collapsed.

According to Zimnisky’s data, the average price of a naturally occurring one-carat white diamond sold for $US6,538 in 2016, while a one-carat lab-grown diamond cost $US5,450.

Now, the disparity in price has increased significantly.

In 2023, the average price of a natural diamond is $US4,726; in contrast, a one carat white diamond made in a lab costs $1,355.

“The price differential between natural and man-made diamonds is so wide that the products are beginning to attract different customer bases,” he said.

De Beers has since pulled out of the synthetic diamond ring business.

(Adapted from ABC.net.au)