If she were alive today, Marilyn Monroe might not be singing about diamonds in the same breathy tones.
The price of these once-coveted gems is in freefall after reaching some lofty heights during the COVID-19 pandemic, which peaked in February 2022.
Pandemic peak
A report by management consulting firm Bain & Company at the time pointed out consumers’ willingness to spend in the wake of the pandemic, spurred on by robust capital markets and economic stimulus programs. Luxury goods and jewellery, including diamonds, were very much in vogue.
As economies reopened after the pandemic, demand cooled, particularly in the US and China, the industry’s most enthusiastic consumers.
Now, data from the Global Rough Diamond Price Index points to an 18% drop in diamond prices from their all-time high last year, with a year-to-date decrease of 6.5%.
And market analysts believe there is more pain on the horizon for ‘a girl’s best friend’.
Paul Zimnisky, CEO of Paul Zimnisky Diamond Analytics, has noted a substantial shift in diamond prices: "A slightly better-than-average-quality 1-carat natural diamond was $6,700 a year ago, today this same diamond is selling for $5,300.”
Uncertain economic climate
Factors contributing to this lacklustre market include persistent competition from lab-grown diamonds, a slower recovery in the Chinese economy and an uncertain macroeconomic environment, according to industry experts.
Such is the rot that renowned diamond company De Beers recently offered its most prominent buyers a unique proposition: the option to purchase nothing at all.
The move was noteworthy for a company that normally expects its handpicked buyers to take all their contracted allocations at a set price or face potential penalties in the future. The one-time monopoly has been forced to remove these restrictions.
During a recent De Beers sale, buyers from India and Antwerp took advantage of the newfound flexibility, collectively purchasing only $80 million of uncut gems, in stark contrast to the typical $400 million to $500 million expected by the elite sellers.
The diamond industry finds itself in a state of crisis as it grapples with plummeting prices, exacerbated by a drop in consumer demand and an accumulation of unsold inventory.
Alrosa, De Beers' rival, has gone so far as to cancel all its sales for two months, while India, a significant hub for diamond cutting and trading, has imposed a voluntary halt on imports.
Newer consumers don’t care
Additionally, the emergence of lab-grown diamonds is making significant inroads in specific market segments, attracting an increasing number of younger consumers who, it’s fair to say, don’t associate the precious gem with elegance and mystery in quite the same way as previous generations.
To address this crisis, the diamond industry has resorted to an unprecedented supply reduction strategy, which appears to be yielding positive results.
Prices at select smaller sales and auctions have seen modest increases, and with Indian factories set to reopen after Diwali closures, confidence is slowly returning.
Watch this space.