As natural diamonds gain in value, synthetic diamonds are on a losing streak

A warning to diamond investors: all diamonds are not the same and it’s best not to find out the hard way.

A rare pink Argyle diamond which is worth millions of dollars. Picture: Keryn Stevens

A diamond ring exchanged between partners is a symbol of commitment: At best, it’s an investment signalling a long-lasting relationship.

But for one customer who came to diamond jewellery retail network Cushla Whiting, after the engagement fell through so too did the value of the ring.

“The customer came in and we checked the diamond. She thought it was a natural diamond, but it was a ‘lab’ (synthetic diamond) and she didn’t know,” says creative director Cushla Whiting.

It turns out the client came in to have the ring remodelled into another piece, having bought the ring some time ago for about 80 per cent of the cost of a natural diamond.

Now it’s likely to be worth up to 50 per cent less than its original purchase price, according to statistics published by the National Jeweller – a magazine published by the non-profit Jewellery Association.

The magazine reported that the wholesale price of a one carat lab-grown diamond in the first quarter of this year cost $1450, signalling that prices have dropped by 27 per cent this year alone.

Australian Diamond Portfolio executive director Anna Cisecki says the gap in price between lab-grown diamonds versus mined diamonds has widened in the past five years.

“In some cases, it’s expanded from a 10 to 15 per cent differential a few years ago to as much as 75 per cent or more now,” she says.

Natural diamonds, while they fluctuate in price, tend to hold their value over long periods of time.

What’s more, Hamish Whiting – Cushla’s gemologist brother, who is based in the global diamond capital of Antwerp, Belgium – recently noted that antique natural diamonds increased in value by 20 per cent this year.

These diamonds were hand cut hundreds of years ago, which is a skill that doesn’t exist anymore, Whiting says.

Lab diamonds shot to popularity particularly among my fellow Millennial cohort in the past two years because they were marketed as a sustainable alternative to mined diamonds.

Cushla, Hamish and sister Anna Whiting – who are originally from New Zealand – started their diamond business about 10 years ago.

General manager Anna says: “A lot of opportunists, mainly in China and India, jumped on that trend and thought we can make money off this.”

As for the synthetic diamond sector, she says: “Most of the operations are in China and India … around 80 or 90 per cent. There’s really zero transparency into these claims of ethics and sustainability … and working conditions.

“It’s moving so fast that regulations can’t keep up.”

Clearly for those with an eye to long-term value, if a lab-grown diamond is not the symbol of love you have been searching for, perhaps an alternative is to buy a natural diamond.

Sydney jewellery designer Alice Wong, from Lovelle Jewellery, says a Gemological Institute of America-graded one carat natural diamond, depending on the colour and cut, could cost between $12,000 and $15,000.

The comparative lab-grown version would cost between $1700 and $1900.

She says to ensure a natural diamond is ethically sourced, buyers should purchase stones which are graded by the GIA.

These diamonds come with a report that details how the stones were polished, the standard of working conditions for the workers and a licence number.

“Good companies in this industry – before you ask – will always provide the report,” she says.

Whiting also points out that you can purchase mined diamonds that are ethical by choosing stock bought from an outlet whose diamonds come from “sight holders”.

According to industry giant De Beers, 91 per cent of the sight holders “are engaged in sustainability or corporate-social responsibility initiatives”.

Natural diamonds are mined, typically from open-cut and underground mines. But synthetic diamonds are manufactured by recreating high pressure and temperature which requires a significant amount of energy.

While acknowledging the natural diamond industry is “not perfect”, Cushla Whiting says diamond mines in countries like Africa and Canada can benefit local communities by ensuring workers are paid above minimum wage.

Producing synthetic diamonds may yet become better regulated, but when it comes to matters other than the heart – will they hold their value?

It’s unlikely, particularly when compared with natural diamonds.

Yes, natural diamond pricing fluctuates and can be affected by periods of economic turmoil, and when disposable income decreases so does supply, says Cisecki at the Australian Diamond Portfolio. But unlike lab-grown diamonds, the supply of natural diamonds is finite and they will become rare.

“From my perspective, to be considered for investment, you need to be looking for a diamond that has intrinsic rarity,” she says.

“For example, like Argyle pink diamonds here in Australia, they’ve skyrocketed in value well over 50 per cent in the last couple of years. With lab-grown diamonds, they have no such rarity.”

So, if price is an issue, a lab-grown diamond may well suit you.

However, one thing is clear, If cost is not the only concern, natural diamonds are likely to hold their value much better than synthetics.