Editor’s Note
This article examines the latest EU sanctions on a major diamond producer and explores the dual market pressures from geopolitical measures and the rise of synthetic alternatives, which together are reshaping global diamond pricing and supply dynamics.
The European Union (EU) has imposed further sanctions on one of the world’s largest diamond producers.
A gemstone specialist reveals how this move could affect the prices of these precious stones.
In addition to sanctions, synthetic diamonds are also influencing market prices.
At the beginning of the year, the European Union (EU), in addition to the existing import ban on Russian diamonds, imposed further sanctions against Russia’s state-owned diamond miner Alrosa and its CEO Pavel Marinychev. Alrosa is one of the world’s largest diamond producers, generating revenues of 332 billion rubles (approximately 3.4 billion euros) in 2021.
As the founder of “The Natural Gem,” a provider of gemstones, Schröck deals with gemstone investments. In addition to stocks and bonds, investors can also put their money into tangible assets. Real estate or precious metals are usually particularly popular. But gemstones such as rubies, sapphires, emeralds, or diamonds can also serve as a store of value.
However, this type of investment is not comparable to securities. Gemstones do not generate ongoing returns like interest or dividends. At the same time, condition and storage costs also play a role – which is why expert knowledge is important. Furthermore, tangible assets are largely illiquid, meaning: investors cannot know if they will be able to sell their investment when they want to.
Those who still invest in gemstones can expect a value increase of up to 550 percent, as an analysis by “The Natural Gem” shows. Accordingly, the price of an untreated ruby from Mozambique weighing 3.577 metric carats (ct.), with very good color quality and very small inclusions – cracks or crystal disturbances – increased from 12,307 euros gross to 66,666 euros gross within ten years.
Well-preserved sapphires and emeralds have also increased in value by 250 percent and 60 percent, respectively, over the past ten years. This corresponds to an annual return of 11.24 percent and 2.92 percent, respectively.
The situation is different for diamonds, however. According to Bloomberg, rough diamond prices have been in a downward spiral, especially in recent months. The reason: buyers are increasingly opting for engagement rings with synthetic, i.e., lab-grown stones.
Diamond demand has generally weakened after the COVID-19 pandemic. However, the stones used for one- or two-carat bridal rings have experienced a much sharper price decline than the rest of the market.
Regarding diamonds, the gemstone expert thinks that there will be a downward price shift, especially in inexpensive jewelry that uses cubic zirconia – also a synthetic product.
However, the overall diamond market will split into a market for real and synthetic goods, as with synthetic ruby and sapphire.
