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Last summer the Federal Trade Commission (FTC) revised its guidelines regarding the marketing of diamonds in ways that were widely interpreted as a victory for the lab grown diamond industry. The previous guidelines had defined a diamond as a “natural” product. The new guides define a diamond simply as “a mineral consisting essentially of pure carbon in an isometric system.” This change was interpreted as putting the lab created product on an equal footing with the product mined in nature.

The FTC also dropped the word “synthetic” from its list of recommended descriptors of lab grown diamonds as confusing the public into thinking it was not a real diamond. It also allowed the use of the term “cultured” to describe lab grown diamonds but only if accompanied by other descriptors clearly indicating the product is lab grown. Even with these changes, the only product that can be described simply as “diamond” is one found in nature. All lab grown products must contain some qualifying descriptor indicating their origin.

So, does this mean, as the lab grown industry hopes, that the difference between the two products will dissolve and there will be just one market for diamonds whether lab grown or mined in nature? Probably not.

Remember, DeBeers announced last year that they will begin selling lab grown diamonds at $800 per carat with the express purpose of lowering the market price of lab grown diamonds to make them a separate product category and not a true substitute for the mined diamond.

A report by Baine & Company, reported in Rapaport Magazine, found that lab grown output is rising 15-20% per year and that prices of the polished grown product had declined significantly due mostly to declining production costs. That finding was confirmed by other analysts.

The lab growers dispute the impact of DeBeers entry into the lab grown market noting that most of DeBeer’s offering are small diamonds set in mountings which is unlikely to impact the sale of larger, loose lab grown diamonds. Nevertheless, the Baine report says the price of large, loose stones had declined significantly.

Another analyst cited in the Rapaport article, says there is significant consumer demand for a one carat lab grown diamond under $1000 but not for those costing $4000 or $5000. If he is right, and the trends noted in the Baine report continue, the markets will separate themselves and lab grown diamonds will settle at the high end of the fashion jewelry niche.