Diamonds are a highly valuable commodity, with diamonds costing nearly $5,000 per carat. However, diamonds have not always been so expensive, with most of their value being driven by clever marketing campaigns and artificial scarcity.
Diamonds were first discovered in southern India in low quantities, with later discoveries occurring in Brazil, South Africa, and Russia.
The initial scarcity of diamonds in India and Brazil made them valuable. However, they had no inherent value or utility, making them little more than precious stones.
Diamonds are not inherently rare. Rather, diamonds without imperfections that can be used in jewellery are hard to find – below 10% meet that criterion.
The discovery of diamonds in large quantities in South Africa in 1870 threatened to flood the market.
Diamonds from South Africa are unique as they are of high quality and are relatively easy to mine.
This presented a major issue for diamond producers as South African mines threatened to flood the market with diamonds and thus crash the price.
In 1888, South African miners merged to form De Beers Consolidated Mines, monopolising global diamond production.
Through this monopoly, diamond miners artificially created scarcity by releasing limited numbers of diamonds into the market annually.
However, diamonds only took off in value in 1938 due to a clever marketing campaign from De Beers and NW Ayer, an American marketing firm.
Diamonds were historically seen as symbols of power, with the word itself derived from Greek, meaning ‘unconquerable’.
In Europe, until the 15th century, diamonds were only allowed to be worn by Kings and Queens as symbols of strength and courage.
De Beers launched a new marketing strategy in 1938 to tie diamonds and love inextricably together. This campaign would also make diamonds a necessary purchase for everyone, regardless of income.
The campaign would have ancient roots, capitalising on the ancient Egyptian and Greek idea that the ‘vein of love’ runs from the tip of one’s ring finger to the heart.
Diamonds were also strategically placed in popular movies, and De Beers endorsed celebrities, particularly women, with diamonds to wear on the red carpet.
By 1941, diamond sales in the United States skyrocketed by 55% compared to 1938.
In 1948, the campaign reached its zenith when a marketer at NW Ayer came up with the famous slogan, “A diamond is forever”.
This campaign increased demand for diamonds significantly, elevating the price and ensuring De Beers would rake in billions of dollars.
The changing diamond market
However, the price of diamonds has been steadily declining in the 21st century, with the price declining by over $1,000 per carat in the last year.
The price of a diamond is determined by the four Cs: Cut, Clarity, Carat, and Colour.
Typically, a lack of colour in a diamond enhances its value. However, recently diamonds with colour have become increasingly popular.
Business Insider reported that chocolate diamonds have grown exponentially in value over the last two decades.
In 2000, chocolate diamonds went for $1,500 a carat; in 2023, they can go for as much as $10,000 a carat.
Off-colour diamonds are now more valuable as they are rarer than colourless diamonds. For instance, chocolate diamonds are only mined in a single location in Australia which is running out.
Diamonds with colour are also much more difficult to make into jewellery as they tend to have more imperfections. Only 4% of mined brown diamonds can be used in jewellery.