Why Are Diamonds So Expensive?

As you shop for an engagement ring, you can’t help wondering “Why are diamonds so expensive?”

Does it just happen to be that way? Is it just bad luck for the prospective proposers of marriage in this vale of credit card tears, that this one kind of gemstone, a diamond for an engagement ring, so important in engagements, is expensive?

Or is that just the way things work out naturally? Maybe diamonds really are that rare. Or maybe fine diamonds, fit for an engagement ring, are rare — even if industrial-grade diamonds aren’t?

You may wonder if maybe it’s a question of demand generated from tradition? Maybe generations-long traditions around diamond engagement rings simply make diamonds expensive by the endless demand for them?

Two Possibilities?

  1. Are diamonds expensive like yachts — because like yachts they simply consume a lot of resources to make? No way around it?
  2. Or are they expensive like $20 Pet Rocks — for no other reason than that they’re cleverly marketed by some, and desired by others?

The answers are well, complicated. It’s so much more complicated than that.

And, you’ll be glad to know, the answers are also reassuring.

The answer to the question, “Why are diamonds so expensive?” is not that they’re like yachts. They don’t take thousands of dollars to mine and cut and bring to market.

But neither is the answer, “Because diamonds are like pet rocks.”

By the time you finish reading this, you’ll know some secrets. And you’ll know the truth. You’ll have answers to the following questions.

Questions You’ll Be Able to Answer When You Finish This Short Article

  1. Why are diamonds so expensive?
  2. So diamonds are expensive. Does that mean they are valuable?
  3. Do diamonds retain value over time?
  4. Are diamonds good investments?
  5. Why are diamonds more expensive than gold?
  6. Are diamonds all that rare?
  7. Why are diamond prices so high?

Once Upon a Time, Diamonds Were Rare

And as such beautiful, indestructible, and sparkling rarities, they were naturally not cheap. They were prized, because demand among people with money to pay far exceeded the supply of diamonds.

Buddhist works from as early as the 4th Century B.C. speak of diamonds as a well-known gemstone.

They were traded up and down the Silk Road, and prized as ornamentation, as powerful gemstones for warding off evil spirits, and for their abilities to cut jade and engrave metal.

Demand for all of these needs far exceeded the supply. So the prices were good. Diamond traders did well.

And for 2,100 years, India was the only known source for mined diamonds. Then in 1725, a source of diamonds was discovered in Brazil.

And Then in 1871 Diamonds Were Suddenly No Longer Rare.

Everything changed in 1871 when prospectors connected to the De Beers brothers discovered a vast source of diamonds under the ground in Kimberley, South Africa.

What came to be known as The Big Hole (after miners over decades, dug a vast hole while squirreling out 3 tons of the precious stones) was a massive find of diamonds.

Good times, right? For the De Beers brothers and other men in the enviable position of cashing in on the find.

Yes. But even from their point of view, the vast supply was both a blessing and a curse.

The good news for them was easy to see. When they had acquired the rights to the land, they were sitting on (quite literally) tons of diamonds. Unimaginable wealth.

But the challenge was that this vast supply had the potential to flood the market with an overwhelming supply of diamonds. It was as if all the beaches in the world had turned into pure gold dust. The question could have been, not “Why are diamonds so expensive,” but “Why are diamonds so cheap?”

So the De Beers brothers got creative. They bought other nearby mines out, they cajoled, they formed what some say is a diamond cartel — a trade group designed to corner a market and maintain high prices.

And that’s exactly what they did, many say.

The supply of fine diamonds is still mostly “conserved,” shall we say, if we want to put a positive spin on it.

In other words, the supply of diamonds seems to be carefully doled out so as not to allow supply to outstrip demand and bring prices down. 

Diamonds Aren’t Rare…But They Kind of Are

So, diamonds aren’t rare, if you consider all the diamonds on earth and in the earth. There are plenty of diamonds to go around, thanks to the prospectors.

The diamonds are out there!

But diamonds in the marketplace? That’s another story. The diamonds anyone has access to purchase are limited. So in that sense, in the only sense that matters in a marketplace, diamonds are rare.

And that’s why diamonds are expensive.

Diamonds Are Expensive Because People Love Them

The other side of the demand/supply equation is, of course, demand.  

And people do demand diamonds. We love them. They’re symbols of eternity, power, luxury, and glamour.

They’re also beautiful.

They also communicate what we as lovers most need to communicate at some very important moments in life.

Your clever, cynical (and um, single) friend may say “It’s just a stone. It’s like a Pet Rock.”

But it’s only just a stone if the whole point of it is ignored. The whole point of a diamond engagement ring is what is communicates — to your beloved, to other people, and even to you yourself.

So that’s another reason whya diamond engagement ring is so valuable, so expensive — because it communicates exactly what you want to say, in ways that words cannot. It’s always there on your beloved’s finger, communicating that — to everyone.

(If a diamond engagement ring were paid by the hour for its lifelong, non-stop communication function, then it’s hardly expensive at all.)

$5,000 divided by 50 years = $100 a year for all that work it’s doing.

$100 a year divided by 8,760 hours in a year = literally 1 cent per hour.

So, you haven’t been tricked by the De Beers and their commercial descendants, when you pay more for a diamond engagement ring than you’d pay for a used Prius. You’re getting a lot more mileage from the ring.

It’s not at all like a Pet Rock. A Pet Rock has no meaning, except as a joke. A diamond engagement ring communicates deep meaning, beyond words, for the rest of your lives together.

The Most Famous Copywriting Tagline in History

“A diamond is forever.”

Mary Frances Garety, a copywriter for the ad men N.W. Ayers & Son, scribbled it on a piece of paper late one night in 1948. She showed it to her bosses the next day. De Beers had hired the N.W. Ayers agency to help sell diamonds after the war was over.

Ayers & Son, her bosses, were skeptical of this stroke of genius, as they were quite stodgy. But they wisely let her poetry stand.

It’s been written into the DNA of global culture ever since.

It may be the most famous tagline of all time. It may also be the most successful tagline in terms of sales generated. (Which is a direct indication of its success in emotionally connecting with the culture.) It’s certainly one of the longest running advertising taglines — it’s been used in every De Beers ad since 1948, and we all still love it.

Have we been tricked, as some say? Tricked into loving diamonds?

No more than we were tricked into liking fast cars, or tricked into liking a good steak, by ads that tell us about them.

No culture was ever sold something, on the scale that Mary Frances Garety sold us on diamonds, that the culture didn’t already deeply desire.

“A ruby is forever,” could never succeed in the same way, because, diamonds really are forever. Nothing else is as hard, durable, ancient, beautiful, and destined to last millions more years.

The best tagline ever? It simply told the truth. No surprise. And reassuring.

Are Diamonds a Good Investment?

If people love diamonds so much, surely they must be a good investment?

Well no.

Or rather, only if you were a White Russian fleeing the communists in 1918, and needed to smuggle as much wealth out of the country as you could manage, sewn into the sleeves of your coat.

Otherwise, diamonds, although expensive, and very valuable as symbols which communicated, are not at all good investments.

Diamonds are a retail purchase, not an investment.

Not a place to park your cash. If you tried to resell a diamond on the open market, on eBay, or even back to a jeweler, you’d be lucky to get 30% of what you paid for it.

If you’re interested in investments, I have two words for you: mutual funds.

But not diamonds.

Why are diamonds so expensive from a jeweler but not when you’re selling them on eBay?

It’s hard to say exactly, because the answer is deep in human nature, and in the culture that has been created around diamonds, engagements, and marriage.

It boils down to: people don’t want second-hand diamonds. Imagine for a minute that you’re going to shop for a diamond engagement ring on eBay. Or off a local market moderated by Facebook or some other app.

Feel queasy? I do, just imagining it.

There’s too much risk of fraud.

But mostly, it doesn’t feel right.

Diamonds are special gifts, symbols of undying love, family, hopes and dreams. Couples want their own. That’s only natural.

What About Lab-Created Diamonds?

Lab-created diamonds are identical in every way (except chance impurities) with natural diamonds.

They’re also quite similar in economic terms. Lab-created diamonds are somewhat less expensive than natural diamonds. But they’re still pricey. And they’re even less valuable on the resale market.

The Final Answer

The final answer as to why diamonds are so expensive?

  • It’s because they’re worth it.
  • They mean what they mean to the lovers who buy them and gift them, and to the beloveds who receive them.
  • The meaning of a diamond is no less arbitrary than the sounds of the words “I love you.” And like the words, the meaning behind the diamond is real. A diamond communicates.
  • And there’s simply no better way to express that meaning in our culture. Maybe there are ways just as good. Of course. But there is no better

The cynical can scathingly recount the story of the De Beers who cornered the market.

The unromantic can sarcastically retell the story of Mary Frances Garety, who penned a tagline for an advertising campaign.

But a diamond is still forever. It still means what it means.

And you can bet that bit of poetry from an ad woman is, like a diamond, forever.

People will love that truth, and repeat it in a hundred languages, for millennia.

Markets reflect realities, sometimes. She wins. Diamonds always do.