Diamonds have long been viewed as timeless symbols of luxury and status. However, their appeal as an investment asset is diminishing. Prices for 1-carat natural diamonds vary significantly depending on quality. For instance, a round-cut, D-colour, VVS1 natural diamond can cost upwards of $20,000, while a round-cut, K-colour, SI2 lab-grown diamond may be available for around $3,000.
According to the latest Tenoris report, lab-grown diamond (LGD) prices have dropped by 74% from their 2022 peak, while natural diamonds have seen a 24% decline during the same period. LGDs typically depreciate by 20%–50% immediately after purchase, pointing to weakening demand and a potential shift in consumer preferences.
Rise of Lab-Grown Diamonds
Lab-grown diamonds are disrupting the global diamond industry in a big way. These diamonds are created using advanced techniques such as Chemical Vapour Deposition (CVD) and High-Pressure High-Temperature (HPHT), making them visually and chemically almost identical to natural diamonds.
Produced at a fraction of the cost, often 60% to 85% cheaper, LGDs offer affordability and faster availability. This shift has redefined market dynamics. Despite these advantages, many buyers remain hesitant. The perception that "mass-produced items lose their value" continues to favour natural diamonds, which are still rare and precious.
This emotional and psychological bias, especially when it comes to gifts or heirlooms, keeps the natural diamond market afloat even as LGDs grow in popularity.
Weakening Demand and Sliding Prices
The demand for natural diamonds is slowing down globally. China, the second-largest diamond market, has seen a 50% decline in demand. Together, China and the U.S. account for around 65% of diamond consumption. With more discretionary spending choices available and ongoing geopolitical tensions, India's cut and polished diamond (CPD) exports have taken a hit, falling 28% year-on-year to $13.04 billion in 2024, according to CareEdge Ratings.
De Beers, one of the world’s largest diamond producers, is sitting on its largest inventory since the 2008 financial crisis, valued at nearly $2 billion. Sales dropped 20% in 2024 after a 30% fall the previous year, largely due to waning global demand and increased competition from lab-grown diamonds.
India’s Diamond Hub Under Pressure
Surat, India’s diamond capital, is also feeling the impact. The city processes nearly 90% of the world’s diamonds and supports over 800,000 workers. However, factory closures, extended holidays, and mass layoffs have become common. The Gems and Jewellery Export Promotion Council (GJEPC) reports that around 30% of Surat’s 15,000 diamond-cutting and polishing units have remained shut since Diwali 2024.
While industry leaders remain hopeful about a recovery, long-term structural issues, such as the rise of LGDs and changing global demand patterns, are casting a shadow on the future.
Diamonds vs. Gold
Comparing diamonds and gold as investments is not straightforward. Lab-grown diamonds, despite being affordable and ethically sourced, have lost nearly 75% of their value since 2022.
Natural diamonds have fared slightly better. A round-cut, D-colour, VVS1 diamond bought for ₹10–12 lakh in 2014 might be worth ₹13–14.5 lakh in 2024, a modest 20% gain over a decade. In contrast, gold prices surged by 178% in the same period, rising from ₹28,006 per 10 grams in 2014 to ₹77,913 in 2024.
Natural diamonds still retain about 90% of their resale value but lack standard pricing benchmarks, making them less liquid than gold. As LGDs lose their appeal and gold continues to perform, many investors are reassessing their strategies.
So, are diamonds a luxury indulgence or a smart investment? That depends on whether emotional value or financial return matters more.
Should Diamonds Still Have a Place in Your Portfolio?
With the market evolving every day, diamonds no longer stand out as a reliable investment. Historically, returns have hovered around 3%–5% annually. Now, with LGDs changing consumer behaviour, demand is shifting even faster.
Today’s buyers include first-time customers, young professionals, and women purchasing for themselves. They’re prioritizing design, affordability, and availability over legacy value. As lab-grown diamonds continue to reshape the idea of luxury, it may be time to ask—what do diamonds really represent now?
A Case for Diversification
This transformation raises an important question for investors: Do diamonds still deserve a place in your portfolio?
In an era where ethics, sustainability, and cost matter more than ever, diamonds—especially LGDs may struggle to retain their traditional value. Investors looking for stable returns would do better to diversify into asset classes like equities, bonds, and real estate. Luxury assets like natural diamonds, watches, or handbags can still play a role, but more as supplementary holdings than core investments.
As the diamond market leads through structural shifts, the best approach is cautious optimism backed by realistic expectations.
Disclaimer: The information provided in this blog is for informational purposes only and should not be construed as financial, investment, or trading advice. Always conduct your research and consult with a qualified financial advisor before making any investment decisions. Past performance is not indicative of future results.
