With the continuous development of the global economy, investing in precious stones such as diamonds has attracted more and more investors. However, the recent plunge in diamond prices also casts doubt on the stability of investing in precious stones. This article will analyze the main factors that influence diamond prices based on the context articles provided, and discuss the future investment value and prospects of precious stones such as diamonds.
De Beers’ market monopoly power is weakening, leading to greater diamond price volatility
The context article points out that the diamond price stability in the past few decades is largely attributed to the market monopoly of De Beers company. By controlling diamond supply and inventory, De Beers managed to keep diamond prices steadily increasing. However, with the rise of competitors like the Russian company Alrosa, De Beers’ share of global diamond supply has dropped to around one third currently. The weakening of its market dominance means De Beers can no longer effectively control diamond prices through supply manipulation. This is an important factor that led to the recent drastic fluctuations in diamond market prices.
Lab-grown diamonds are emerging as a competitor of natural diamonds
The increasing supply of lab-grown diamonds, which have identical appearance to natural diamonds, is also disrupting the diamond market. Although still accounting for a relatively small share currently, lab-grown diamonds are rapidly gaining market share. And prices of lab-grown diamonds have been decreasing at a much faster pace compared to natural diamonds. The price difference between the two has narrowed significantly. This indicates that consumers are starting to view lab-grown diamonds as viable alternatives to natural diamonds, especially for non-romantic purposes like investment. The emergence of lab-grown diamond is reducing the investment value of natural diamonds.
Economic downturns may dampen diamond demand in the short term
As analyzed in the context articles, diamond price stability has also relied on steady market demand. During economic downturns and uncertainty, the demand for diamond jewelry tends to weaken, negatively impacting diamond prices. The COVID-19 pandemic has severely limited social activities and weakened wedding demand. So the unusual slump in engagements and diamond demand in 2020 may only be temporary. But in the long run, the weakening of the main pillars supporting diamond prices, including De Beers’ control over supply and the uniqueness of natural diamonds, will have a more lasting impact on the investment value of diamonds.
In summary, the recent diamond price plunge is attributed to factors like decreased monopoly control of supply, competition from lab-grown diamonds, and short-term demand drops. Although diamonds may still hold appeal for romantic symbolic purposes, their weakened investment value means investing in diamonds and other precious stones now carries higher risks and uncertainties. Investors may need to re-evaluate the long-term prospects of precious stones investment.