From Luxury Goods to Cheap Symbols: The Diamond Market Is Accelerating Its Collapse

The pricing myth of natural diamonds is unraveling. Technological breakthroughs in lab-grown diamonds have completely destroyed the scarcity premium that sustained high prices for natural diamonds, accelerating a structural collapse.

In the first half of August, the Diamond Standard Index tracked by Bloomberg Terminal fell to a historic low. Currently, affordable, comparable-quality lab-grown gems are eroding the natural diamond market at an unprecedented pace.

Market observers believe the inflection point for downward price momentum has arrived. Commentator Saul Sadka on social platform X stated bluntly that the collapse of natural diamond prices will "accelerate significantly" in the coming years, as the natural diamond market shrinks in both scale and value, "being dragged into the abyss by the commodification of its products through modern technology."

The impact of this shock extends far beyond the jewelry industry itself. For consumers who view wedding rings as a store of value, the foundation supporting this logic has been shaken.

For the entire natural diamond industry chain, from mines to cutters, the end result of this shock may be the systemic disintegration of the industry.

Rise of Lab-Grown Diamonds, Scarcity Premium Completely Disappears

The fundamental logic behind the collapse of natural diamond prices lies in the rapid advancement of lab-grown diamond technology.

X user Crémieux pointed out:

The technological progress in lab-grown diamonds is astonishing; it is no surprise that most engagement rings now use lab-grown diamonds.

Lab-grown diamonds are physically and chemically identical to natural diamonds, making them virtually indistinguishable to ordinary consumers and even professional testing equipment in practical scenarios.

Sadka noted that even using $20,000 worth of professional testing instruments to distinguish between the two is meaningless in real-life contexts.

More importantly, the reasons for consumers actively choosing lab-grown diamonds are increasing. Sadka believes that most buyers do not care about the product's origin, which precisely undermines the last moat of natural diamonds.

Sadka further analyzed the failure of pricing logic: No matter how much premium multiple consumers are willing to pay for the "natural" attribute, once the production cost of lab-grown diamonds approaches zero, the absolute value of the "natural premium" becomes negligible. Sadka emphasized:

People are willing to pay a little more for the backstory of the same product, but not infinitely more.

Supply Contraction Unsustainable, Price Drop Reaches 50%

Facing the 冲击 from lab-grown diamonds, natural diamond producers have supported prices by significantly compressing output.

According to data cited by Sadka, natural diamond production was cut by approximately 20% over the past four years, dropping from 120 million carats annually to 98 million carats.

Even so, natural diamond prices have actually cumulatively fallen by about 50% over the past four years. Sadka emphasized that supply contraction only delayed the collapse; once production returns to previous levels, prices will fall even faster.

Meanwhile, the "eternal" attribute of natural diamonds is becoming another source of pressure for the industry.

Sadka pointed out that as the Baby Boomer generation passes away, a large volume of natural diamonds from their estates will flood the secondary market, creating a new surge in supply. At that point, even the remaining demand in the high-end market may no longer rely on mines and cutters. Sadka stated:

Diamonds are truly eternal, a fact that has now become a curse for the industry.

Lessons from Pearls, Diamonds May Become "Tacky" Symbols

Sadka compared this process to the collapse of the pearl market a century ago: technological advances similarly ended the scarcity myth of natural pearls, causing them to transform from markers of high society into mediocre, stereotypical symbols within 50 years.

He predicts that diamonds will undergo a similar, or even more drastic, image reversal, with "diamonds becoming a mark of tackiness rather than a symbol of class or exclusivity."

He cited scenes on the streets of Miami as an example: individuals who "look like gangsters" flaunt massive tennis bracelets. While similar jewelry might have sold for up to a million dollars 20 years ago, it now costs only about the same as a second-hand Rolex.

This decline in cultural image may be more damaging to the industry than the price drop itself. Once the association between diamonds and wealth or taste is completely severed, the commercial logic of the entire industry will be impossible to rebuild.

Signs of this trend's impact on related industries are already evident. Citing the case of Israel, Sadka pointed out that the diamond industry once accounted for 3% of Israel's GDP, but has now dropped to below 0.2%.

For investors and consumers, the logic of using natural diamonds as a store of value no longer holds. Sadka's conclusion is straightforward: If you are planning to buy a wedding ring expecting it to retain its value, "I'm afraid you will be disappointed."