When weighing diamond or gold for investment, historically gold has offered steady returns during economic uncertainty while diamond returns were high but volatile. However, the diamond supply monopoly has been eroding and lab-grown diamonds are gaining market share, leading to the recent plunge in diamond prices. Though admitting the Covid-19 pandemic has impacted diamond demand, the 40% drop in prices signals the declining market power of diamond suppliers.
Gold provides stable returns especially in economic downturns
The articles analyze that gold, as a rare and precious commodity, has provided quite stable investment returns historically, especially in times of economic uncertainty. This contrasts clearly with diamond investment, which is subject to greater volatility in prices and returns. Even though diamond prices also rise amid economic prosperity thanks to higher demand for diamond jewelry, its returns cannot rival the stability gold offers investors through economic cycles.
Diamond monopoly getting dismantled by competitors and lab-grown diamonds
A key factor behind steady diamond price increases in the past is the supply monopoly held by De Beers consortium. By controlling global production and supply, De Beers restricted speculation and smoothed out price fluctuations in diamonds. But since the 1980s its market share has declined significantly due to competitors like Alrosa. At the same time, advance of lab-grown diamonds offers cheaper alternatives to mined gems, accelerating the erosion of the diamond cartel’s control over prices.
Recent 40% diamond price plunge signals loss of pricing power
While admitting the diamond market has been impacted by the Covid-19 pandemic, the drastic price cuts of 40% highlights the suppliers’ inability to curb volatility through supply management anymore. Mined diamond prices are falling rapidly following the downward trajectory of lab-grown diamonds. This loss of pricing power does not bode well for the investment outlook of diamonds, in contrast with gold which has retained its appeal.
In recent years, the stability and investment returns of gold have outperformed the declining diamond market. With suppliers’ weakened ability to control diamond prices, gold seems to offer better long-term investment value.