According to Rapaport, the prices of one-carat polished natural diamonds fell 4.7 percent in August. Thirds fell the same amount, and half-carat diamonds fell 8.6 percent.
To me, these figures are shocking. These price differences are for the period of one month, not six months or a year, and they do not account for the many price reductions that have occurred in the past several months. This is just shocking.
I have to conclude that natural diamond prices are crashing. Inventory listings of polished diamonds are at record highs. Idex reports that India's exports in July suffered a 39 slump year over year. Israel's rough trade was down by around 45 percent for the same month. All these factors, coupled with the strains of inflation, interest rates and competition from laboratory-grown diamonds, are leading to a loss of confidence in natural diamonds. The only way to avoid a major loss of confidence is to implement dramatic change.
Demand dictates price -- De Beers August sale of rough diamonds saw a year-over-year decrease of 42 percent, and India's cutting industry is running at 40 to 50 percent below capacity. To sum up, consumer demand is down, and diamond miners, manufacturers and wholesalers are hurting as sales and prices fall and inventory stagnate.
However, there is a sector of the diamond industry that is strategically positioned to cause a dramatic change. There is a civil war in the diamond industry, with new diamond participants like Pandora and Swarovski expanding globally into man-made diamonds. I've heard that major Diamond Cutters are in the process of executing a plan to destroy the value of lab-grown diamonds. Most Diamond Cutters are losing enough money that they no longer want to play nice. Sometimes desperate times require Desperate Measures. The big manufacturers have been keeping their staff by purchasing and processing lab-grown diamonds. Now, manufacturers have billions of dollars invested in natural diamonds, and these carbon copies that they produce are hurting their natural diamond sails.
What to do? The answer is powerful and logical: larger diamond manufacturers are business behemoths. Their fortune is tied up in natural diamonds. Man-made rough is cheap. For a relatively small investment, these Cutters can buy and produce millions of carats of lab-grown diamonds. The value of lab-grown diamonds is in the cutting, not the rough. So, to protect their natural diamond investment, cooperatively, they are buying tons of man-made rough, producing it and creating a huge oversupply with the intention of dumping it on the market and reducing the price to levels so low that the product becomes relatively worthless. This is the reason the price of lab-grown diamonds is crashing while demand is growing.
The risk to implement this plan is minimal, and the upside is huge. Carbon copies have a fatal flaw, and that flaw is an infinite supply. Exploiting this flaw wins the war.
If my sources are correct, the carbon copy selling now in retail stores for hundreds or thousands of dollars may become worthless, like cubic zirconia. I don't believe that if you place a cubic zirconia, a lab-grown diamond and a natural diamond beside each other, consumers can see the difference. So logically, it is not far-fetched to say the carbon copy could become the new cubic.
Business is a game of opportunities. Success can be as simple as understanding a simple flaw in a product and exploiting it
Mel Moss
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