Gold and silver prices continue to rise, while diamonds have fallen significantly. Here’s why.
The jewelry industry, as well as investors, are witnessing a somewhat surprising phenomenon. While gold and silver prices seem to hit new record highs every day, diamond prices appear to be declining. Gold, the ultimate safe haven, and silver prices have also reached new highs for geopolitical reasons. The new surge follows US President Donald Trump’s threat to impose new tariffs starting in February on the eight European countries that oppose US control of Greenland. Furthermore, in response to the threat, the European Union is considering counter-tariffs worth $93 billion. This tension has pushed spot gold prices up 1.8% to $4,677.82 an ounce. Silver also increased further, hovering around $94 (+4.09%). Other metals used in jewelry are also rising: platinum reached $2,350.
Why, instead, is the price of diamonds falling? The most coveted gems have lost value. In particular, the price of smaller diamonds, up to 1 carat, has fallen, with their cost decreasing by up to 36% in a year. For larger gems, however, the value has decreased by around 5-6%. So, why are diamond prices falling? An answer was provided by Martin Rapaport, an entrepreneur considered a diamond market guru and founder of the Rapaport Diamond Report, a price list that represents the standard for diamond pricing.
At Vicenzaoro January, during a talk organized by the International Jewellery Confederation (CIBJO), Rapaport explained that the reason lies in changes in society, not in market mechanisms. For Generation Z, according to the expert, natural diamonds are no longer as desirable as they once were. Furthermore, diamonds are a special type of commodity: the higher their price, the more people desire them. Diamonds, in short, are part of what are known as Veblen goods: they are symbols of luxury, whose demand increases proportionally to the increase in price—the opposite of what happens for everyday objects.
Another reason for the decline in diamond prices is the increase in the quantity of lab-created gems. China and India have flooded the market with synthetic diamonds: the price of these lab-created gems is also falling sharply. Furthermore, sales of man-made diamonds have reduced the number of buyers of natural stones, especially at the lower end of the market. This is another factor, therefore, that has contributed to the decline in demand for natural stones.
