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I did a blog post in January on synthetic diamonds moving into the jewelry pipeline. Both Gems and Gemology (the publication of the Gemological Institute of America) and Rapaport are full of articles lately on synthetic diamonds.

It seems that synthetic diamonds are very appealing to Millenials for several seemingly good reasons. “Lab created diamonds resonate particularly well with a Millennial audience…because they are beautiful, responsible and affordable,” say Lara Ewen in Rapaport magazine. She is correct, they are cheaper than natural, mined diamonds. The discount at the present time is 20 – 25% and that could mean paying $15,000 for a 2 carat diamond rather than $20,000. Also, there is no mining involved and so there is no environmental damage involved in producing the product.

Buying a lab created diamond also gives one certainty that the diamond is not a “conflict” diamond, meaning that it was not mined in an area controlled by African rebels and the profits from the sale not used to kill women and children in a civil war.

And then there is the technological wizardry. Millennials seem to like the idea that a diamond can be made specifically for them in an 8000 degree reactor; that they can dictate the shape and form it will take and watch the process from inception to final product. It is high tech, sustainable and environmentally friendly.

AH, and therein lies the rub. Synthetic gem quality diamonds are a very new TECHNOLOGICAL product. And like all new technological products, the price is certain to fall. So, if you pay $15,000 for a synthetic 2 carat diamond instead of $20,000 for a natural one, and 5 years from now the same synthetic diamond is selling for $5000, how will you feel? Martin Rapaport thinks that synthetic diamond prices will fall by 50% in 2 years and that there is no reason why ultimately the price won’t decline to the levels of cubic zirconia or moissanite.

The reason for this is that there is a potentially unlimited supply of synthetic diamonds with new players rushing to get into the business and rapid technological improvement decreasing the cost of making the product. On the other hand, natural diamonds will retain their value and continue to be a store of value not only because they are beautiful but because they have natural scarcity. The rarity of beautiful, natural diamonds relative to demand will cause prices for these stones to remain high.

For more on the future of natural diamond prices, see my blog post below on the subject.