Editor’s Note
As Valentine’s Day approaches, The Economist questions the enduring allure of natural diamonds. The rise of lab-grown alternatives is challenging a decades-old marketing narrative, prompting a fresh look at what truly makes a symbol of love timeless.
On the 8th, the British weekly economic magazine The Economist published an article ahead of Valentine’s Day titled “Don’t Propose with a Diamond.” The article suggested that the myth of diamonds, established after De Beers, the world’s largest diamond producer, introduced the slogan “A Diamond is Forever” in 1947, might be shattered due to the growing competitiveness of lab-grown diamonds.
Lab-grown diamonds have gained immense popularity, now accounting for half of all diamond engagement rings sold in the United States. American jewelers report that lab-grown diamonds currently make up over 50% of diamond unit sales, a sharp increase from just 1 in 10 in early 2020.
While natural diamonds form over hundreds of millions of years about 200 km underground, lab-grown diamonds are created in just a few hundred hours by cultivating a small diamond seed in a laboratory. Their quality is typically indistinguishable to the naked eye. They share the same chemical composition, crystal structure, and optical and physical properties as natural diamonds, making them virtually impossible to differentiate without specialized equipment.
According to Paul Zimnisky, a diamond industry analyst, in 2015, the prices of natural and lab-grown diamonds were nearly identical. However, by 2024, the same amount of money could buy a lab-grown diamond four times larger. This is because, over the past few years, it has become easier to manufacture diamonds in factories than to mine them from the ground.
Prices for lab-grown diamonds are expected to fall further by the end of this year, potentially allowing consumers to purchase stones six times larger than natural diamonds for the same price. On this, The Economist noted:
Natural diamond prices have continued to decline. While rough diamond prices spiked briefly after Russia’s invasion of Ukraine in early 2022 due to supply concerns (Russia accounts for about 30% of global supply), they have been falling steadily since.
According to the International Diamond Exchange (IDEX), the diamond price index fell to 94.94 on the 10th. This represents a 40% drop from its all-time high on March 7, 2022 (158.39) and is down about 13.3% compared to a year ago. This trend contrasts sharply with the price of gold, which has hit record highs, surpassing $2,900 per troy ounce.
This decline is due to demand shifting from natural to lab-grown diamonds. In the United States, the largest market for lab-grown diamonds, imports of natural diamonds plummeted by half between 2022 and 2024. During the same period, De Beers’ sales fell by one-third.
While diamond industry analysts predict increased demand for lab-grown diamonds based on current trends, The Economist offers a different analysis, suggesting the diamond market itself could shrink.
Does cheaper price automatically mean higher demand? Typically, the value of a good moves inversely to its price. However, as anyone who has bought a diamond engagement ring knows, this ring is not an ordinary good. It is a one-time purchase to commemorate a significant milestone, where the price tag is as important as the ring itself. The large, sparkling stone on a fiancée’s finger signifies the size of the proposer’s love, or more accurately, the size of their wallet. Diamonds are chosen precisely because they are rare and, consequently, expensive.
This is similar to the Veblen effect, a concept introduced by American economist Thorstein Veblen. It describes a phenomenon where demand for luxury goods like imported cars or jewelry increases as their price rises, as they are consumed to flaunt purchasing power.
The Economist forecasts that due to the similarity between lab-grown and natural diamonds, diamonds may eventually no longer serve as a symbol of love and wealth.
According to Paul Zimnisky, while the wholesale price of lab-grown diamonds has plummeted by 90% over the past six years, jewelers have not passed these savings on to retail prices, instead increasing their profit margins. The retail margin on a 3-carat lab-grown diamond has risen from around 30% five years ago to nearly 90%. In contrast, the margin on natural diamonds remains around 30%.
There is significant room for lab-grown diamond prices to fall further. Martin Rapaport, chairman of the Rapaport Group, a major player in global gem distribution, predicts:
Furthermore, because the diamond retail market is competitive, jewelers will find it difficult to maintain the current high margins on lab-grown diamonds. Some online retailers are already selling lab-grown diamonds for just a few hundred dollars.
A man preparing a proposal might readily choose a larger $4,000 lab-grown diamond over a smaller $6,000 natural one. However, he would likely balk at a lab-grown diamond costing only $300 compared to a $6,000 natural diamond, as no one wants to be seen as a “cheap” husband.
The Economist concludes that if lab-grown diamonds start being sold by costume jewelry companies or in discount supermarkets, their position as a luxurious gift suitable for a Valentine’s Day proposal will crumble.
This scenario poses an even greater problem for companies selling natural diamonds in places like New York City or other bustling districts. Competition from lab-grown diamonds has already driven down the price of a 1-carat diamond by 37% over the past six years. If lab-grown diamond prices fall further, the price of diamonds sold by jewelers could drop significantly more.
It appears that jewelers and sellers will soon face the task of convincing consumers that natural diamonds hold more value. The Economist ended its article by suggesting De Beers might have been wrong, stating, “Diamonds are not forever.”