ASK THE EXPERT: Diamond Series – Economics of Diamonds

The sparkling world of supply and demand

By Heather Wuelpern

Welcome to part five of this six-part series with local diamond expert, Birko Roland, co-owner of The Diamond Store. Today, you will learn about the economics of diamonds. The next edition will cover diamond trends.

Diamonds have traditionally been considered a symbol of luxury and wealth, and some individuals have considered them as an investment as well. However, it is important to understand the economic factors that influence their investment potential. 

When the COVID-19 pandemic began to subside, and people started to leave their homes again, Birko Roland, co-owner of The Diamonds Store, noticed an interesting phenomenon. “People were buying diamonds like never before!” he said. In fact, 2021 was the most profitable year he had ever seen. He speculated that it had to do with some people having extra money from not traveling or holding off on making other major purchases during the pandemic.

Because diamond mining operations were shut down during the pandemic and since supply-chain issues and travel restrictions were part of the equation, the price of natural diamonds increased. In turn, lab-grown diamonds became more popular mostly due to the fact that a larger diamond could be had for less money. Roland said the savings of lab-grown diamonds can be up to 70% as much as the cost of mined diamonds. 

The pandemic showed how supply and demand affected the value of diamonds. Prior to then the historical performance of investing in diamonds had been relatively stable with a gradual price appreciation over time. Although, historical performance does not necessarily guarantee future results. Individual diamond investments can vary based on rarity, quality, or general market trends. In more recent years, the value of diamonds has increased considerably. For example, if you had bought a two-carat diamond in 1990, now it could be valued close to 80% more. 

But if you are considering cashing in on our grandmother’s diamond ring, understand that it might be an old European cut or an old mine cut, which means they were cut with different procedures than how they are cut today. The diamonds ended up being hazier because of the culet in the bottom of the diamond where the light would escape instead of reflect. So although they are rare, they are not as valuable, other than for sentimental reasons. 

In Roland’s opinion, pink diamonds are one of the best diamonds for investing in because only one diamond mine in the world—The Argyle Diamond Mine in northwest Australia—had them. The mine shut down in October 2021 when it exhausted its supply, so the value of these exquisite pink diamonds rose. Pink diamonds are also available in Russia and Africa sometimes, but they don’t compare to those from Argyle. Other rare colors include green, blue, and red diamonds.

When it comes time to invest in your love, the equivalent of three months’ salary still holds true as a general guideline when it comes to buying an engagement ring. Although, the experts at The Diamond Store understand that diamonds can sometimes be a purchase that may be a bit beyond their customers’ budget for a particular stage of life. However, knowing that it will be something that lasts forever and will be a beautiful reminder of the love each time the giver or receiver sees it, choosing a more expensive diamond is something to consider. Luckily, the Diamond Store’s 0% in-house financing makes it easier to purchase a bigger diamond for an affordable monthly payment. For example, a $10,000 ring ends up being about $160/month for five years. 

Keep in mind that while diamonds can be part of a diversified investment portfolio, it is wise to approach purchasing diamonds mostly for their beauty rather than strictly as a financial investment. 

Now that you have learned about the economics associated with diamonds, come back a week from next Sunday for the final part of this six-part series to learn about trends and how to turn a legacy piece into a modern treasure you adore.