Diamond Prices Trends
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Diamond Prices Trends: Are they a good investment?

Sharif Khan
Sharif Khan
Last Updated    EST 
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With continued economic growth around the world, the demand for luxury goods, coupled with a decline in diamond mining, is expected to drive an increase in the prices of gem-quality natural diamonds.

While the overall health of the economy influences diamond prices, this precious gemstone has consistently gained value over the years. Data indicates that diamond prices have risen by approximately 32-33% over the past decade, resulting in an average yearly increase of 4%.

De Beers no longer maintains control over the diamond supply, with their market share decreasing from around 90% in the 1980s to nearly 30% at present. This shift is positive news, as diamonds have demonstrated their ability to retain value even without the domination of a major corporation over their supply.

For current prices, please explore our diamond price index.

While the resale market for diamonds requires further innovation and strengthening, an investment-grade diamond purchased at the right price will largely retain its value. Always strive for gem-quality super ideal cut diamonds with a G+ color, VS1+ clarity, 1 carat or more in weight, no fluorescence, and certification from GIA or AGS in order for it to maintain its value. Furthermore, you can refer to this diamond-buying cheat sheet for additional guidance.

Notably, the current economic downturn and increased demand for lab-grown diamonds have led to a decline in prices for natural diamonds of approximately 5-12%. Nevertheless, we anticipate a recovery in these prices and firmly believe that this is an opportune time to consider purchasing diamonds.

Diamonds as an Investment

While many experts might argue that a diamond is not an ideal investment, this perspective does not hold universally true. Acquiring a diamond from a reputable source at a wholesale or near-wholesale price, especially if it is a top-tier gem of exceptional quality, can position it among the finest commodities to possess. The fact that billions of dollars are invested in this captivating gemstone is a testament to the soundness of such an investment. Nevertheless, procuring a diamond at a marked-up price of 100-200% presents a different scenario.

Pure natural diamonds have established their value by possessing a relatively standardized price benchmark or threshold, similar to gold. While Rapaport significantly influences this benchmark, market forces also play a role. This distinct advantage is not shared by other natural gemstones. The absence of a standard benchmark complicates matters for dealers attempting to assess the appropriate value for a particular gemstone, such as a ruby or emerald. Unlike diamonds, valuing other natural gemstones is often a matter of conjecture.

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Diamond Prices Trends

Determining the optimal price for a diamond holds paramount importance for both investors and consumers. This exquisite and rare gemstone has maintained a consistently high value over the years. To comprehend the trajectory of diamonds and their market worth spanning the last fifty years, gaining a comprehensive overview of the global diamond industry is imperative.

The enduring allure of diamonds, coupled with their historical pricing, underscores the significant role of demand for diamond jewelry in shaping their valuation. As the world's economy continues to thrive, the anticipation is for a positive upswing in diamond demand.

As demand for this unique gemstone escalates in the upcoming years, it is foreseeable that demand will eventually outpace the growth of diamond production. The deceleration in current mining operations and the scarcity of new discoveries contribute to this projected disparity. With heightened demand, it has become increasingly evident that supply and demand dynamics in the diamond market, consequently influencing global prices, are inextricably interlinked.

Comparable to other commodities, polished diamond prices undergo fluctuations influenced by a range of external and internal factors. Economic vicissitudes and traders’ expectations are among the external factors, while a nuanced interplay of forces has molded diamond price trends over the past five decades.

Observing diamond prices over the last decade reveals notable fluctuations at specific junctures. While diamond prices exhibit a relatively steadier trajectory compared to minerals like gold, variations have transpired. Surveys indicate an approximate 33% increase in diamond prices over the past eight years, resulting in an average annual growth of 4%.

Annual diamond price fluctuations manifest on a moderate scale, typically ranging between five to seven percent. Noteworthy instances include a drastic price decline of over 12% in August 2008 compared to January of the same year, a consequence of the global financial market collapse. Conversely, in 2011, diamond prices surged by an unprecedented 20% due to heightened demand.

These oscillations reflect an intricate interplay of influencing factors. Manufacturer and wholesaler interventions, alongside the inherent diversity in mined diamond sizes, further contribute to price dynamics. The diamond's size significantly impacts its price, with larger diamonds exhibiting more pronounced fluctuations than their smaller counterparts.

Examining larger diamonds reveals a gradual, over 15-year price increase, including a notable tripling of 4-carat diamond prices between 2004 and 2008. In contrast, smaller diamond price shifts have been relatively subdued over recent years.

Historically, De Beers' monopolistic influence profoundly shaped diamond prices. As their dominance waned, external economic forces began exerting greater sway. Notably, the year 2008 witnessed a rapid and significant diamond price escalation, attributed to a confluence of economic factors.

Global consumer demand also plays a pivotal role in shaping diamond prices. Notably, the Chinese market's ascent in 2013 contributed to an estimated $76 billion in sales, marking a substantial increase from the previous year.

Diamond prices have been subject to fluctuations in the market for rough diamonds, partly attributed to inflation. Some diamond types have experienced significant value depreciation, influenced by various market dynamics, including production and distribution changes.

The growing popularity of alluring-colored diamonds, particularly driven by Asian investors, has contributed to market dynamics. Colored diamonds, especially blue, pink, and yellow varieties, have appreciated considerably more than colorless diamonds over recent years.

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The diamond market has exhibited heightened volatility, partly attributed to the dissolution of the historical cartel structure. Continued demand growth coupled with a diminishing supply, driven by factors like De Beers' reduced stockpile and limited new discoveries, suggests a sustained rise in diamond prices.

Once at its zenith in 2006, diamond production has declined due to a reduction in Kimberlite discoveries. The potential for new discoveries offers the prospect of stabilizing supply and prices. The diamond market underwent a significant transformation over the past five decades, primarily due to the emergence of substantial mines in Russia, Canada, and Australia, thereby challenging De Beers' dominant influence.

Over time, De Beers' market share has dwindled, affecting diamond market dynamics. While possessing a 90% market share in the 1980s, it has now receded to approximately 33%, marking a gradual shift that continues to shape diamond prices.