Why Are Diamonds So Expensive?

what are diamonds made of

70 to 80% of the diamond market is controlled by one business, called De Beers. While this would generally be considred an illegal monopoly in the United States, this company is headquartered in Luxembourg.

De Beers was formed in 1927, when diamonds were not considered a precious gemstone and they were relatively cheap. The founders of the company worked to secure a monopoly on diamond mining operations throughout the world.

Onced they secured the majority of the world market through a monopoly, they successfully marketed diamonds as a must-have for engagement and wedding rings. Through thier Diamonds Are Forever campaign, started in 1947, the company convinced common cultures (especially in the US and Japan) that diamonds were the best representation of beauty, strength, and love. Common culture has come to accept this as a common fact, which makes them inherently valuable given De Beers continued monopoly on the market.

To keep up with illegal diamonds and man-made diamonds, a diamond certification program has been established and strictly adhered to by the jewelry market. Certifications include authenticity verification and a rating of the 4 'C's of a diamond: "Cut", "Color", "Clarity", and "Carat-Weight"

So diamonds are essentially expensive primarily due to the limits on supply caused by so few of companies having access to a large, natural supply of diamonds. Even as new mines are discovered, every effort is made to continue to control supply in order that the market price of the gemstones are sustainable over long periods of time.

Unlike precious metals, diamonds may not keep their value as well over time and their prices could be subject to long-term slippage if the monopoly grip is loosened over a long period of time. That being said, because diamonds are such a part of our value culture and because the high value monopolies are strictly maintained, diamonds may continue to hold their value over time. Aside from that, the cultural value of having a high-quality diamond in and of itself provides and intrinsic value that could be sustainable by general market forces for generations to come.


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