Economies are back to normal, demand has eased and prices have started to fall
A one-carat natural diamond cost $6,700 a year ago, while today it sells for $5,300.
“Diamonds are a woman's best friend,” as one song goes. However, they are not the best choice for an investor, given that in recent years they have lost a significant part of their value. The price of diamonds has fallen 18% from an all-time high hit in February 2022, and is down 6.5% year-to-date, according to the Global Rough Diamond Price Index. And their value is expected to decline even further.
“A one-carat natural diamond cost $6,700 a year ago, and today it sells for $5,300,” says Paul Zimnisky, CEO of Paul Zimnisky Diamond Analytics. Diamonds, like other jewelry, have seen their value soar during the pandemic.
But now that economies are back to normal, demand has eased and prices have begun to fall. Increasing competition from lab-grown diamonds, slower-than-expected growth in China and heightened uncertainty have taken some of the shine off the diamond market, analysts say.
An increasing number of consumers are now turning to laboratory diamonds. The share of these diamonds in the market is constantly increasing: in 2020 it was only 2.4% and now it has exceeded 9%. They are visually similar to natural diamonds and are the “perfect substitute,” says Angara Jewelry CEO Ankur Daga. But the most important thing is that they are much cheaper.
“Three years ago you could find a laboratory diamond at a price corresponding to 20% or 30% of the price of a natural diamond”. Now the price has reached 75% to 90% of the price of a natural diamond, according to Daga, who attributes the lower prices to machines that have become much more efficient at producing more lab-grown diamonds.
In a worst-case scenario, he predicts natural diamond prices will fall 20% to 25% from current levels over the next 12 months, which would mean a drop of close to 40% from their all-time high.
< p>Analysts do not expect sanctions to be imposed on the diamonds of the top producing country, Russia. In early May the G7 group had considered imposing sanctions on Russia, with Britain taking the initiative for unilateral sanctions on the Russian state diamond company Alrosa.
Russia is the world's largest producer of diamonds and followed by Botswana and the Republic of Congo, according to the Diamond Registry.
However, Russia will have no trouble continuing to sell its diamonds, despite the sanctions, especially to countries such as India, the United Arab Emirates, even in the European Union. India is the world's largest importer of diamonds, with the US in second place, followed by Hong Kong, Belgium and the United Arab Emirates.
