Diamond prices collapse as labs overtake mined stones and upend luxury market

Something once unthinkable is happening in the historic world of diamonds. The stones that have symbolised wealth, power, and unbreakable love for centuries have lost half their value since 2022.

Diamonds may be forever. Their prices, it turns out, are not.

The culprit is a technological revolution that has transformed one of the world’s oldest luxury markets. Diamonds grown in laboratories are flooding jewellery stores, undercutting mined stone prices by as much as 80 per cent and changing what consumers expect to get for their money.

The shift is also a human story. Lovers searching for engagement rings must now choose between a lab-grown diamond, or natural stone formed over 1 to 3 billion years in the earth’s crust.

Is the cheaper stone a bargain, or a cheap copy trading at a knock-down price? The answers depends who you ask.

Today, most lab-grown diamonds are manufactured in China and India. In the labs intense pressure and heat above 1,000°C is applied to carbon to copy the natural production process in the earth’s crust. This means the lab-grown diamonds have the same physical, chemical, and optical properties as diamonds dug from a mine.

They’re practically identical, other than in history and scarcity.

Mai Vu a diamond jeweller in Sydney’s central business district tells customers and friends to to stop worrying about what the industry thinks they should buy.

“Instead of getting a one-carat natural diamond, you can get a synthetic three-carat, superior colour, clarity, and it’s cheaper, so why not,” she says.

The rising supply of lab diamonds since 2020 means they’ve fallen in price fast and the savings are compelling.

Ms Vu says a 2.5-carat lab-grown diamond that sold for about $15,000 in stores in 2020 can now be bought for roughly $6,000. A natural one-carat diamond that cost about $15,000 in 2020 sells for about $12,000 today.

The gap in price falls between natural and lab-grown reflects the supply difference. Labs are making more diamonds, whereas falling prices means less mining, production, and smaller profits.

Tough decisions

Natural diamond pricing has always been hard to track. Every mined stone is different, the wholesale market is opaque and there’s no centralised exchange setting a single global price.

New York-based independent diamond expert Paul Zimnisky of Diamond Analytics says there’s little doubt wholesale prices in aggregate are down 50 per cent from highs in early-2022.

“That said, prices of certain categories are actually up, such as higher-quality elongated fancy shapes like oval, marquise and cushions in sizes two-carats and larger,” he says.

Mr Zimnisky is among a minority of diamond industry experts sceptical about the mania for lab-grown stones.

For obvious reasons, few diamond jewellers or traders will publicly criticise lab-grown diamonds that now account for the majority of their sales and profits.

Mr Zimnisky says that as production increases, lab-grown diamonds will keep falling in price.

“Once the dust settles, I expect most lab-diamonds will also be sold as inexpensive jewellery products,” he says.

He points to manufactured rubies, emeralds and sapphires, which have long existed alongside their natural counterparts without destroying the market for rare stones.

“The excitement around cheap coloured gemstones has since long worn off,” he warns.

However, the lab-grown diamond industry has turned itself into a formidable marketing machine to bolster prices.

The term “lab-grown” is marketed over terms like synthetic or artificial. The sector also dominates online marketing via Google Search, banner advertising and popular social media channels. On Instagram, many jewellers market stories or pictures of happy and attractive couples wearing lab-grown diamonds.

Size is the most powerful selling point.

Consumers increasingly prefer larger sizes, ahead of other factors like clarity or cut. That trend plays directly into the hands of laboratories, which can manufacture stones at sizes rare in nature.

Marketers of lab-grown diamonds even claim they’re more ethical than the ‘Blood Diamonds’ made infamous by the 2006 movie of the same name. It linked African diamonds to child labour and civil war.

But even the ethical argument is complicated.

“If size is important to you, then go for a lab grown, but know in two or three years’ time it will have little resale value,” says Ms Vu.

“If you prefer tradition then maybe go for a smaller natural diamond. On the ethics of it all, look, I really don’t know and that’s a personal thing for any buyer. People talk about ethics in natural diamonds, but is a diamond from an Indian lab more ethical? Who knows.”

Ultimately, she tells clients not to overthink or overcomplicate any decision.

“I say diamonds are like the clothes you buy, everyone has different budgets, tastes, styles. And, I say buy what makes you happy. What you’re paying for is what that person loves, or what you instinctively love, nothing else.”

Natural boast real value

But the tumbling diamond prices are creating simmering anguish in London’s historic precious stone dealing district of Hatton Garden.

Gem dealing dates back 500 years on its streets, but few traders want to publicly talk about the potential for natural diamond prices to fall further.

The dealers don’t like to admit that prices customers are paying for natural diamonds today, may be cheaper in the future.

Small retailers are also reluctant to hold too much inventory on worries that falling prices will erode the profit margin they earn from shoppers. Instead, many source a stone from a dealer only after a client requests it. This eliminates the risk of stock losing value as it waits to be sold.

One of Hatton Garden’s largest diamond dealers, who declined to be named, warned lab-grown diamonds will keep falling in price as supply floods demands.

“I don’t trade synthetic, or so-called lab grown diamonds, so unable to help,” he told The Nightly.

“Synthetics are grown by industrial processes in Indian and Chinese factories. They’re an artificial product, with no or very little resale value. They’re OK to buy in fashion jewellery, but lack the rarity, history and billions of years of age. Real diamonds are rare and becoming rarer as current mines close, or come to the end of their economic life.”

Are natural diamonds now cheap?

New York-based analyst, Mr Zimnisky, believes the collapse in lab-grown prices could eventually establish a floor under natural diamond prices.

Once laboratory stones become sufficiently cheap and commoditised, he argues, natural diamonds will regain value, precisely because they’re scarce.

The last peak in natural diamond sales and prices occurred during the lockdown years of 2020 and 2021 as money printing and ballooning wealth boosted ultra-luxury shopping and the prices of a wide range of assets from cryptocurrencies to jewellery soared.

Mr Zimnisky says the K-shaped economy where the asset rich, get richer, and spend more will support natural diamond prices over the medium-term.

Since 2022, the analyst estimates diamonds have fallen 50 per cent in value, while the US Consumer Price Index is up 14 per cent, and gold up 144 per cent.

So are natural diamonds actually a bargain in 2026?

They might be, according to Rhona Fitzpatrick, the chief executive and founder of Dublin-based retailer The Diamond Experts.

“The market is under pressure, for sure. But, I honestly think it’s a good time for buyers,” she says.

“This is really an unusual story as luxury is genuinely more affordable now, which is great.

“Most of my clients want a specific, like an engagement ring, so they’re not trying to time the market, but are getting cheaper prices. Those savings can be spent on a wedding or upgraded honeymoon.”

Fitzpatrick’s business began offering lab-grown diamonds about a decade ago. She has watched consumer attitudes change from uncertainty to acceptance to a clamour to buy. Lab-grown stones now account for 55 per cent of her engagement ring sales.

“Society doesn’t judge anymore. Five years ago people would come to me unsure about lab-grown, but now they’ve learnt themselves. A lot of my clients wear both, lab-grown is definitely a permanent change. And the fashion is for larger diamonds among younger buyers.”

Alchemy and AI

The diamond industry’s technological shock also raises other big questions.

If scientific breakthroughs can manufacture diamonds, could advances in artificial intelligence also produce gold in laboratories?

The implications of alchemy for the $US31 trillion ($43 trillion) gold market and global economy would be profound.

Mr Zimnisky says nuclear physics has already demonstrated that manufacturing gold by turning one element into another is possible.

In August, Swiss scientists claimed they made lab-gold during research into the start of the universe, while working on an experiment named ALICE at the Hadron Collider.

The catch is that the scientists made less than one-millionth of a gram - at a specialist laboratory that is used to study nuclear physics.

For now, the cost to manufacture makes this alchemy impractical, if not impossible.

In 1954 lab-diamonds were also an impractical dream. Until US industrial giant General Electric first manufactured a reproducible one 72 years ago. The advances in diamonds’ manufacturing are a potential road map of upheaval in gold as well.