The Retained Value Of Lab Grown VS Natural Diamonds

The Retained Value Of Lab Grown VS Natural Diamonds

Hello everyone!


This week we will resume our discussion about lab grown diamonds, particularly when it comes to evolving market trends and value retainment.

Before we begin, it is important to know that lab grown diamonds are a relatively new player in the industry, therefore much of what will be shared regarding future trends and prices is more or less speculation. Also, whenever we compare prices of lab grown diamonds with naturals, it is always for the exact same specifications of the 4C’s and certification, so that the only difference between the two stones is that one is natural and the other is man-made.


As mentioned in our previous post, a lab grown diamond will generally cost you less than a natural diamond, and that has caused demand for this commodity to surge as people search for more pocket-friendly (and green/sustainable) alternatives. The price of lab grown diamonds as compared to naturals continues to drop; today they are priced on average 30% less than natural diamonds.


The main factors affecting this difference in price are those of supply and demand. Initially, as with most nascent products born of relatively new technologies, the cost of production of lab grown diamonds meant that the cost of the final product was on par (if not higher) than the natural alternative it was meant to replace. However, with continued technological innovations and advancing production methods, manufacturers  were able to drive down the costs and, naturally, prices followed. As demand continued to grow (due to changing trends as well as some shrewd marketing), new manufacturers saw an opportunity to benefit from this new and growing market segment. Enter China and India. Taking advantage of economies of scale, these two countries are currently the top two producers of lab grown diamonds in the world, and their increasing production continues to drive prices down even further.


So, what does all this mean to the value of your lab grown diamond? Well, it’s impossible to predict the future, but if prices continue to drop they way they are, then a lab grown diamond you purchase today would have cost you much less if you waited longer to buy it. Consequently, the value retained would plummet. On the other hand, natural diamonds usually retain (more or less) 50% - 60% of their purchase value (if bought at fair market prices). This is because prices of natural diamonds are fairly stable, whether it is because of the rarity of the natural gem, or because of intentional limitation of supply by major monopolies.


A great comparison from a technical and value standpoint of a lab grown versus natural version of a rare precious gem is emerald. In the 90’s labs were able to create exact copies of natural emeralds in the lab. As demand for this new lab grown product began increasing greatly, manufacturers jumped into the market, and prices began plummeting (100 dollars per carat to 40 dollars per carat in less than a year). This is why it’s hard to imagine that prices of lab grown diamonds won’t continue to decrease over time, especially with no cap on supply by manufacturers and technological innovations and economies of scale driving costs down even further.


The verdict: You can certainly get the same amount of sparkle and save a lot of money getting a lab grown diamond instead of a natural diamond, but you would have to be comfortable knowing that retained value may be almost nonexistent, and that the price of the exact same product may become cheaper in the future.

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