Plummeting by 50%, the diamond market is accelerating its collapse.

The myth of natural diamond pricing is collapsing.

Technological breakthroughs in lab-grown diamonds have completely destroyed the scarcity premium that natural diamonds rely on to maintain high prices, and a structural collapse is accelerating.

In the first half of August, the Diamond Standard Index tracked by Bloomberg Terminal hit an all-time low. At present, low-cost, comparable-quality lab-grown gemstones are eroding the natural diamond market at an unprecedented rate.

Market observers believe that the inflection point for price decline has arrived. Saul Sadka, a commentator on social platform X, said bluntly that the collapse of natural diamond prices will "accelerate significantly" in the next few years, and the natural diamond market is shrinking in both size and value, "being dragged into the abyss by the commoditization of its products brought by modern technology".

The impact of this shock goes far beyond the jewelry industry itself. For consumers who regard wedding rings as a means of storing value, the foundation supporting this logic has been shaken.

For the entire natural diamond industry chain, from mines to cutters, the end of this shock may be the systematic collapse of the industry.

01

The Rise of Lab-Grown Diamonds, Scarcity Premium Completely Disappears

The fundamental logic behind the collapse of natural diamond prices lies in the rapid advancement of lab-grown diamond technology.

X user Crémieux pointed out:

The technological progress of lab-grown diamonds is amazing. It is not surprising that most engagement rings now use lab-grown diamonds.

Lab-grown diamonds and natural diamonds are exactly the same in physical and chemical properties, and ordinary consumers and even professional testing equipment can hardly distinguish them in actual usage scenarios.

Sadka pointed out that even if a professional testing instrument worth 20,000 US dollars is used to try to distinguish the two, it is meaningless in real life.

More importantly, there are increasing reasons for consumers to actively choose lab-grown diamonds. Sadka believes that most buyers do not care about the origin of the product, which precisely destroys the last moat of natural diamonds.

Sadka further analyzed the failure of pricing logic: no matter how many times the premium consumers are willing to pay for the "natural" attribute, once the production cost of lab-grown diamonds approaches zero, the absolute value of the "natural premium" will be negligible. Sadka emphasized:

People are willing to pay a little more for the story background of the same product, but they will not pay unlimitedly more.

02

Supply Contraction Can No Longer Be Sustained, Price Drop Has Reached 50%

Facing the impact of lab-grown diamonds, natural diamond producers have supported prices by drastically cutting production.

According to data cited by Sadka, natural diamond production has been cut by about 20% in the past four years, from 120 million carats per year to 98 million carats.

Even so, natural diamond prices have actually fallen by a cumulative total of about 50% in the past four years.

Sadka emphasized that supply contraction only delays the collapse. Once production returns to the previous level, prices will fall even faster.

At the same time, the "eternal" attribute of natural diamonds is becoming another source of pressure for the industry.

Sadka pointed out that as the Baby Boomers pass away one after another, a large number of natural diamonds in their inheritance will flood into the second-hand market, forming a new torrent of supply. By then, even the remaining demand in the high-end market may not need to rely on mines and cutters. Sadka said:

Diamonds are truly eternal, which has now become a curse for the industry.

03

The Lesson of Pearls: Diamonds May Become a "Tacky" Symbol

Sadka compares this process to the collapse of the pearl market a hundred years ago: technological progress also ended the scarcity myth of natural pearls, making it transform from a symbol of high society to a mediocre stereotype within 50 years.

He predicted that diamonds will experience a similar or even more drastic image reversal, "Diamonds will become a symbol of tackiness, not a symbol of class or exclusivity."

He took the scene on the streets of Miami as an example: those people who "look like gangsters" swagger through the streets wearing huge tennis bracelets. The same jewelry may have sold for as high as millions of dollars 20 years ago, but now it is only equivalent to the price of a second-hand Rolex.

This decline in cultural image may be more damaging to the industry than the price drop. Once the connection between diamonds and wealth and taste is completely broken, the commercial logic of the entire industry cannot be rebuilt.

The impact of this trend on related industries has already been traced. Sadka cited the case of Israel and pointed out that the diamond industry once accounted for 3% of Israel's GDP, but now it has dropped to less than 0.2%.

For investors and consumers, the logic of using natural diamonds as a value storage tool is no longer valid. Sadka's conclusion is straightforward: if you are planning to buy an engagement ring and expect it to retain its value, "I'm afraid you will be disappointed."

This article is from the WeChat official account "Wallstreetcn", author: BAO Yilong, published with authorization from 36Kr.