March 02, 2017 3 min read
A quick internet search will show you rants about how “diamonds aren’t rare.”
"It’s all a conspiracy."
"DeBeers controls the world’s diamond supply through a predatory international monopoly..."
All of this is unfounded in the modern diamond economy.
First... Diamonds form 100 miles beneath the earth's surface, through a process of tremendous pressure and extreme heat, over billions of years. The stones are later pushed toward the surface of the earth through volcanic activity.
And of all the diamonds that are pushed toward the surface of the earth, less than 20% of the diamonds mined worldwide are gem quality. (The other 80% are used for industrial purposes; saws, drills, etc.)
And, of the 20% that are gem quality stones that go on to be polished and sold to the public...
Only 1 in 1,000 polished diamonds will weigh more than one carat.
So gem quality diamonds in general are rare and the earth isn't making any more on-demand.
And large (1 ct+), natural, gem-quality diamonds are very rare, by anyone's standards.
Second... The DeBeers monopoly ended over a decade ago when multiple international suppliers refused to distribute their diamonds through the DeBeers single-channel monopoly.
So, the argument that diamond scarcity is manufactured and controlled by one company was true at one time, but it's not true today, and it hasn’t been true for some time.
And diamond prices have stayed stable.
Prices didn’t drop dramatically when the market opened to other suppliers...
Because large, natural, gem-quality diamonds really are rare(see point 1).
Third... There is a fixed, limited number of natural diamonds on earth. We can’t force the earth to make more...
And the world is changing.
The U.S. has been the largest consumer of diamonds for a long time... But China and India are rapidly catching up as massive consumers of luxury goods.
If diamonds are limited, and more people want to share them, then they’re going to become more scarce over the coming decades, not less.
And, Fourth... The first three points have been mostly about the rarity of rough diamonds, but...
You pay for a diamond that has been carefully cut in the hands of a diamond cutting master who has been training for decades.
Aspiring diamond cutters must apprentice forten years, cutting smaller diamonds, before they’re allowed to even touch a one carat diamond.
Think about that.
Diamond cutters train for the same amount of time as doctors before cutting a larger stone.
On top of that, most diamonds are NOT cut to maximize light performance and sparkle. Why? Because diamonds that are cut to maximize sparkle lose a lot of their original size in the process.
Which means that a finished, ideal cut, one carat diamond actually started as a much larger diamond.
Now, having said all that... The true value of a diamond is obviously what it symbolizes.
You buy it for what it means.
But rest assured: Diamonds are becoming more expensive, more valuable, and more rare over time.
And it’s my prediction that this will only accelerate as wealth expands around the world.
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