Diamonds have lost their lustre – are they worth buying?

Diamonds – and diamond rings in particular – have long been a symbol of the marital bond. But as attitudes to marriage shifted over the centuries, and the institution was no longer primarily seen as an arrangement cementing family ties and assets, rings came to symbolise romance.

Diamonds emerged as the jewel of choice in the 20th century, a result of increasing affluence after World War II, booming diamond mines in South Africa and, crucially, shrewd marketing.

In 1947, American copywriter Frances Gerety coined the phrase “A diamond is forever”, for mining giant De Beers, connecting the jewel’s durability with the hope of a long-lasting marriage. This was hailed by Advertising Age as the greatest advertising slogan of the 20th century and turbocharged De Beers, which has had a near-monopoly on diamond production for most of the past 100 years.

How diamonds infiltrated popular culture

The notion of a diamond’s romantic permanence infiltrated popular culture. In the 1953 film Gentlemen Prefer Blondes, Marilyn Monroe declared that a “kiss on the hand might feel good”, but a “diamond tiara is forever”. Dripping in jewels, she sang that “diamonds are a girl’s best friend”. Ian Fleming named a James Bond novel Diamonds are Forever; it transferred to film with the same title. In 2026, the British singer Raye demanded a “big and shiny diamond ring” in her hit song Where is My Husband!.

De Beers’ marketing also successfully spread the idea that men should spend a certain portion of their salary on an engagement ring to show their devotion. Hoping to counteract a slump in sales during the Great Depression, the group suggested that one month’s earnings should be spent on a diamond ring; by the 1980s, diamonds apparently required two months’ salary. Today, some people say three months. Before World War II, only 10% of engagement rings in Western countries contained a diamond, but by the end of the century, 80% did.

Today, however, the diamond industry is at a crossroads. Natural diamonds’ prices have dropped more than 50% over the past five years, falling from an average of $8,007 per carat in 2021 to $3,898 per carat last month, says CNBC. A carat is a unit that measures the weight of a gemstone, with 200 milligrams equaling one carat.

Meanwhile, the Diamond Standard index, which tracks the market value of investment-grade natural loose diamonds, hit an all-time low of around $2,490 in August. The index is now at $2,460. This decline has been driven by the popularity of laboratory-grown diamonds since the artificial-gem market’s inception more than a decade ago.

Laboratory-grown diamonds look uncannily similar to the natural thing. They are more economical to produce and 60%-85% cheaper than natural ones, according to Queensmith, a jeweller. A 0.3 carat laboratory-grown diamond can cost £390, while a natural version can set you back £980. A 1.2-carat man-made diamond can go for about £1,630, compared with £8,000 for a natural one. Laboratory-grown diamonds accounted for 61% of engagement ring sales in the US in 2025, up 239% from 2020, according to a 2026 study by The Knot, a wedding platform.

Unlike natural diamonds, which are formed over billions of years in the Earth’s mantle and require mining, laboratory-grown ones are created using extreme pressure and heat, mimicking the natural stone’s geological development in a matter of weeks. Synthetic diamonds can give shoppers more options over size, cut, style and price, with consumers buying diamonds with 1.9 carats on average, compared with 1.6 carats for natural ones, says The Knot.

An ethical alternative to ‘blood diamonds’

The study also noted that 40% of US couples said it was important that their diamond was laboratory-grown, suggesting that ethical concerns about the transparency of supply chains are also in play. Consumers know the origin of a diamond produced in a laboratory, but a natural diamond’s provenance can be murkier.

Diamonds can be mined in conflict zones, funding military action (these are often known as “blood diamonds”); production through forced labour, or the exploitation of indigenous people are further concerns. The rough diamond industry has also been hit by weak demand from Chinese consumers since Covid, reflecting the trend in the broader luxury market.

Supplies are also dwindling. Some major mines are closing or have already closed, such as the Argyle mine in Australia and Diavik in Canada. De Beers slashed production 12% in 2025 and has $2 billion worth of unsold diamond inventory, while its 50/50 joint venture with Botswana’s government, Debswana, has cut output 40% since 2023. Russian miner Alrosa, the world’s biggest producer of rough diamonds by volume, has been hit by sanctions and is also lowering production.

There have been some big discoveries, such as the 2,488.32-carat Motswedi diamond from the Karowe Mine in Botswana by Canadian mining company Lucara in 2024. But finding new mines is a slow and costly process, so supply remains under strain. “Natural diamonds still have appeal, especially rare and high-quality stones,” says Lale Akoner, global market strategist at trading platform etoro.

However, “better jewellery sales do not automatically translate into better prices or profits for miners. De Beers’ rough-diamond prices were still under pressure in the first half of 2026”. Low supply should have bolstered prices, but the shift to laboratory-grown diamonds has thwarted a recovery.

De Beers tried to jump on the laboratory-grown gem bandwagon, launching its own brand, Lightbox, in 2018, but amid a freefall in prices in synthetic gems for jewellery, it closed it down in May 2025. Lightbox was impeded by fierce competition from budget laboratory-grown brands from India and China, such as Power Diamond, Huanghe Whirlwind, Yasheng, and Caraxy. Lightbox initially sold gems at $800 per carat, but prices fell 90% by 2025, according to De Beers.

Duncan Wanblad, chief executive of De Beers’s parent company, Anglo American (LSE: AAL), recently admitted to the Financial Times that the company could “have been a little bit more aggressive on the signals we were getting” from the competition from laboratory-grown gems.

De Beers’ sparkle is dimming

De Beers was once the dominant player in the diamond industry, controlling up to 90% of the world’s supply of rough diamonds. The company was formed in 1888 in South Africa via the merger of British colonists Cecil Rhodes and Barney Barnato’s companies, backed by the Rothschild family. De Beers Consolidated Mines was created to act as a cartel to control diamond production and prices.

It was later owned by the Oppenheimer family, and mining giant Anglo American took control of De Beers in 2011. De Beers is now 85% owned by Anglo American and 15% by Botswana, the world’s second-largest producer. Today its market share is 25%, and it has lost about $7 billion in value since 2023 from consecutive write-downs. Last year, it reported an underlying loss (before interest and tax) of $787 million and revenue of $3.5 billion. Anglo American has been trying to offload the company since 2024. Recent reports suggest that Cartier’s owner Richemont could join a consortium led by De Beers’s former CEO Gareth Penny to bid for Anglo American’s stake. It could be sold for as little as $1 billion.

Meanwhile, a struggling natural-diamond industry will hamper growth in diamond-producing countries such as Botswana, whose economy is largely dependent on them. Diamonds made up 80% of exports, 33% of fiscal revenues, and 25% of GDP in 2024, according to the International Monetary Fund.

Collect, don’t invest

De Beers’s advertising campaign convinced people that diamonds are forever, but they may not necessarily make for a great investment or resell for much. Diamonds lack liquidity, a tradable market, and a transparent spot price like other commodities, says Russ Mould, investment director at broker and investment platform AJ Bell. The cost of production varies so widely due to the vast array of unpredictable geological conditions and yields that it is virtually impossible to establish a minimum baseline figure, which is not the case for other raw materials.

Although diamonds can be easy for investors physically to store and insure, jewellery comes with a “hefty retailer’s mark-up”, which is an “obstacle to anyone hoping to use diamond jewellery as an investment”, says Mould. With Anglo American suffering from “buyer’s remorse” over its De Beers investment and now struggling to sell the business, “investors should take the hint”.

Despite being a commodity, diamonds cannot be used as a hedge against inflation and market volatility, as gold can. “From a portfolio perspective, the test of a hedge is whether I can value and sell it when markets are stressed,” says Akoner.

“Gold passes that test much more readily than an individual diamond. Diamonds differ substantially in quality, trade infrequently and have a wide gap between what a consumer pays and what they may receive on resale. I would not [see] them as an inflation or crisis hedge.”

Akoner says that for investors seeking broad commodity exposure, she favours a diversified fund and “would consider a diamond miner only with a clear view on that company’s balance sheet and a much higher tolerance for risk”.

While laboratory-grown diamonds are good value for consumers, “as an investment, the economics work against the buyer” because supply can grow as production improves and wholesale prices continue to fall. “I would see the lower purchase price as the benefit, rather than expect to make money on resale,” adds Akoner. According to jeweller Queensmith, sellers of second-hand laboratory-grown or natural diamonds could receive 30%-40% less than the price they paid for them.

Nonetheless, diamonds could appeal to collectors, but at the very top end of the market and for stones such as the Motswedi diamond or the “azure blue” 32-carat diamond, which sold for $8.4 million at auction this June. Serious collectors buy rare-coloured diamonds or jewellery with a recognised maker and documented history, says Akoner. They are “betting that another collector will pay more for that rarity in the future”. But she cautions that a “headline auction result is not the return every owner will achieve”.

“I would see such pieces as a specialist investment for someone who already has a diversified portfolio, while treating ordinary diamond jewellery primarily as something to enjoy.” Square-cut or pear-shaped, diamonds are not an investor’s best friend.

This article was first published in MoneyWeek’s magazine. Enjoy exclusive early access to news, opinion and analysis from our team of financial experts with a MoneyWeek subscription.