Why Are Diamonds So Expensive?
Last updated in January 2017
In the 1953 flick Gentlemen Prefer Blondes, Marilyn Monroe famously sang that diamonds are a girl’s best friend. And if you click on a bridal website or hang out in front of the windows at Tiffany’s, you won’t find any evidence to the contrary. Diamonds, the hardest substance in the world—and one of the most expensive—remain the number one choice for engagement rings in the U.S. and among the most popular stones in other types of jewelry pieces.
Wearing a carat or two of bling on your left hand isn’t an age-old tradition. Diamonds were very rare until the late 19th century, when significant deposits were unearthed in Africa. Although diamonds became much more common, they didn’t become less valuable. For nearly a century, the Luxembourg company De Beers held a virtual monopoly over the diamond industry, and by limiting the supply kept prices stable—and artificially inflated.
Discoveries of large deposits of raw stones in Russia, Australia, and Canada broke De Beers’ monopoly over the supply of diamonds; it now supplies only about one-fifth of rough diamonds. But because only a handful of companies still own most of the world’s supply, and De Beers itself controls two-thirds of the world’s diamond distribution, prices haven’t dropped. In fact, they keep rising.
De Beers also largely invented demand for diamonds. In the 1930s, De Beers hired the New York advertising agency N.W. Ayer & Son to polish up the gem’s image, eventually leading to slogans like “A Diamond Is Forever” and the widely held idea that wannabe grooms should pony up one- or two-months’ salary for a rock. Yep, the social custom determining how much to pay for an engagement ring was trumped up by the company selling most of the diamonds.
Since diamonds are overpriced and overhyped, you may want to go for another type of gem. But before you sub a sapphire for a diamond, or buy a lab-grown sparkler, check in with your sweetie. Defying social norms ain’t for amateurs.