As the diamond market faces one of its sharpest downturns in decades, gold continues to attract investors seeking refuge from economic uncertainty.
While diamonds struggle to maintain their traditional status as a store of value, gold is on track for its best annual performance in over a decade, driven by central bank purchases and escalating geopolitical tensions.
With these two assets experiencing vastly different trajectories, the debate over which offers a stronger store of value has never been more relevant.
The diamond industry is facing significant upheaval, marked by inflation reducing consumer spending, a slowdown in China’s luxury market, and the rapid rise of lab-grown diamonds.
According to Morgan Stanley’s projections, lab-grown diamonds will account for 18% of the market this year, increasing to 21.3% in 2024, equivalent to 25.1 million carats compared to 118 million carats of mined stones.
It’s noted that China has emerged as the dominant player in lab-grown production, contributing 12.7% of global supply this year, up from 9.3% in 2022, while India follows at 2.9%.
These shifts, are pushing the natural diamond market from its traditional high-value, low-volume model to one characterized by higher volumes and lower prices, reshaping consumer perceptions and market dynamics.
Moreover, the data shared by Barchart reveals that diamond prices have plummeted to their lowest levels this century. This decline reflects the mounting challenges faced by the industry, from declining demand to the rising prominence of lab-grown diamonds, which continue to pressure natural diamond valuations.
As recently noted by De Beers’ recent actions, it is as a reflection of the mounting pressures in the market.
The world’s largest diamond producer implemented a price cut of over 10% at its final sale of the year—the steepest reduction in years—after resisting such measures throughout 2024.
Persistent declines in secondary market prices forced De Beers to abandon its earlier strategy, highlighting the depth of the challenges facing the natural diamond industry.
Based on prediction, the lab-grown diamond market expands and consumer preferences evolve, the traditional allure of mined diamonds as a store of wealth will continue to diminish, signaling a major shift for one of the world’s most iconic luxury markets.
In contrast, gold continues to solidify its status as a reliable store of value, set to close 2024 with a 27% annual gain, its best performance since 2010.
Gold has benefited from central bank purchases, ongoing geopolitical tensions, and economic uncertainty, making it a preferred choice for investors seeking stability.
Central banks have bolstered their gold reserves, and the asset’s appeal has been further supported by subdued U.S. Treasury yields.
Although a strong U.S. dollar has capped some of gold’s short-term gains, the Federal Reserve’s cautious stance on interest rate cuts in 2025 is likely to sustain demand for the precious metal as a hedge against inflation.
The Verdict: Gold outshines Diamonds
The diamond market’s value-preserving potential has been significantly eroded by structural challenges, including inflation, the rise of lab-grown alternatives, and shifting consumer preferences.
In contrast, gold’s enduring stability and resilience amidst economic and geopolitical uncertainties solidify its position as the superior store of value for 2025.
For investors prioritizing long-term security and wealth preservation, gold stands as the clear choice, consistently outshining diamonds in a market landscape undergoing rapid transformation.