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There has been much discussion lately about how diamond prices have stagnated over the past two decades, with various experts weighing in on whether these precious stones are worth considering as investments. However, this entire conversation misses a fundamental point - diamonds were never truly investments in the first place, and the very idea that they could be is a carefully constructed marketing myth.
The recent attention to the Diamond Standard Index's lacklustre performance over 22 years might seem like news. Still, it merely confirms what smart savers have long known: the diamond market is unlike any other investment market you might consider. The basic principle of any investment is not just its quoted price but the realisability of that price - what you can actually get when you want to sell. With diamonds, this gap between theory and reality is rather large, to put it mildly.
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This peculiar nature of diamonds isn't accidental - it's by design. The story goes back to 1870 when massive diamond discoveries in South Africa threatened to destroy the gem's value forever. The solution? Create a monopoly, which became De Beers, to control supply and prices. But the real masterstroke came in 1938, when Harry Oppenheimer, the founder's son, launched one of history's most successful marketing campaigns, transforming diamonds from mere precious stones into supposed symbols of eternal love and value.
The campaign didn't just sell diamonds; it sold the idea that diamonds should never be sold. The famous slogan "A Diamond is Forever" wasn't just romantic poetry - it was a brilliant strategy to prevent a secondary market that could reveal the true economics of diamond ownership. After all, if no one sells their diamonds, no one can discover how little they're worth on resale.
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Today's discussions about diamond price stagnation miss this point. The index might show certain price levels, but these numbers are essentially theoretical for the ordinary investor. Try to sell a diamond, and you'll encounter a maze of technical specifications about cut, clarity, colour, and certification—variables that always seem to reduce your stone's value significantly below what similar diamonds supposedly sell for.
The modern twist to this tale is the emergence of lab-grown diamonds, which now offer identical gems at a fraction of the cost. While this technological advancement has disrupted the traditional market, it has also inadvertently highlighted the artificial nature of diamond valuations. The industry's response to lab-grown diamonds - emphasising the 'authenticity' and 'rarity' of natural diamonds - rings hollow when you consider that the entire concept of diamond value was manufactured through marketing.
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What's particularly interesting about the current diamond price stagnation narrative is how it's being discussed as if it were a normal market phenomenon, like a dip in stock prices or a correction in the gold market. But unlike these markets, there has never been a transparent, liquid secondary diamond market. When you buy shares or gold, you know exactly what you'll get when you sell. This basic feature of a true investment has always been absent with diamonds.
For the Indian saver looking to build long-term wealth, the lesson isn't just that diamond prices haven't grown - they were never meant to grow for the retail investor. The entire structure of the diamond market, from its controlled supply to its opaque pricing, was designed to flow value in one direction: towards the sellers, never the buyers.
So, when we see headlines about diamond prices stagnating over 22 years, we may be asking the wrong question. The real question isn't why diamond prices haven't grown - it's why we ever considered them an investment in the first place.
Instead, real investments are those that generate actual value through productive enterprise. Whether it's businesses creating products and services, bonds financing growth, or real estate providing utility, genuine investments have clear mechanisms for value creation and transparent markets for price discovery. They offer verifiable returns, standardised units of ownership, and, most importantly, the ability to sell at a fair market price whenever needed. These investment fundamentals haven't changed in centuries, and no amount of clever marketing can transform a luxury purchase into a wealth-building tool.
Also read: Value, boom and bust
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