Diamond prices have fallen sharply.

No longer a favorite choice for investors, the price of rough diamonds has fallen by nearly 20% in just over a year.

Diamond prices have fallen 6.5% since the beginning of the year and are down more than 18% from their all-time high in February last year, according to the Global Rough Diamond Price Index. Analysts believe the value of diamonds could continue to plummet.

"Last year, a 1-carat natural diamond of slightly above-average quality was worth $6,700; today, that same diamond is selling for $5,300," Paul Zimnisky, CEO of Paul Zimnisky Diamond Analytics, told CNBC .

Diamonds, along with other jewelry, saw a sharp increase during the pandemic, peaking early last year. "Consumers were willing to spend at that time. They had more cash on hand from investment returns and economic stimulus programs, and were ready to spend on meaningful gifts for loved ones," said consulting firm Bain & Company in a report last February.

Ankur Daga, CEO of online jewelry company Angara, said that when people couldn't travel or spend money outside, that surplus was poured into jewelry and luxury goods.

But as the economy began to reopen, diamond prices also fell and were subject to a sell-off, according to Daga.

According to industry experts, ongoing competition from lab-grown diamonds, China's slower economic recovery, and an uncertain macroeconomic environment are also contributing factors to the weakening of this market.

Synthetic diamonds at the Diam Concept laboratory in Paris, France, on March 16, 2023. Photo: Bloomberg

Edahn Golan, CEO of Edahn Golan Diamond Research & Data, said that more and more consumers are switching to lab-grown diamonds, with prices falling 59% over the past three years.

"The proportion of lab-grown diamonds compared to natural diamonds is increasing. In 2020, this product accounted for only 2.4% of total market sales. By 2023, this figure will reach 9.3%," Golan said.

Synthetic diamonds are created in a laboratory under controlled conditions using extreme pressure and temperature to replicate how natural diamonds are formed. Daga says the synthetic and natural products are identical chemically, physically, and optically. But more importantly for most consumers, they are significantly cheaper.

And more and more people are choosing lab-grown diamonds for their engagement rings.

"Labor-grown diamonds are indistinguishable from natural diamonds, and if I can buy a bigger diamond for the same price, why not?", said Jonathan Lok, 29, from Singapore, who proposed with a 0.76-carat lab-grown diamond ring.

Edahn also noted that the price of lab-grown diamonds has dropped sharply in recent years. "Three years ago, you could buy lab-grown diamonds for 20-30% less than natural diamonds. Now it's down 75% to 90%," Daga said, attributing the decrease in production costs to modern manufacturing technology and machinery.

Angara's CEO predicts that the price of natural diamonds could fall by 20% to 25% from current prices in the next 12 months, marking a 40% drop from its peak in February.

"It is likely that prices will continue to fall, especially given the high profit margins for retailers on lab-grown diamonds, around 60% compared to 34% for natural diamonds," predicts Edahn Golan, CEO of Diamond Research & Data.

According to him, labor costs are still rising and it's a very important part of the diamond production process. "So there's still a natural price floor somewhere," Daga said, adding that the market could rebound after the 25% drop.

According to Bain & Company, diamond production also involves cutting and polishing rough diamonds before they are crafted into jewelry, which is the "most complex" and most expensive part of the value chain.

Furthermore, diamond market observers are not anticipating sanctions against Russia – the world's leading producer – fearing this could lead to a sharp increase in prices.

In early May, the G7 economies convened a discussion on imposing sanctions on Russian diamonds, with the UK taking the lead in sanctioning the state-owned company Alrosa.

"Russians have increased diamond sales in recent months in an effort to regain market share lost last year," said Zimnisky, CEO of Paul Zimnisky Diamond Analytics.

Russia is the world's largest diamond producer, followed by Botswana and Congo, according to the Diamond Registry.

Edahn believes Russia will have no problem selling diamonds despite sanctions, especially if buyers continue to appreciate Moscow's gems. "Countries like India, the UAE, and even the European Union don't impose sanctions on rough diamond imports. So, once again, there won't be a real shortage," he said.

Minh Son ( according to CNBC )

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