Ch ch ch changes . . .

Gold and diamonds.

Two words that spark visions of beauty, wealth, and allure.  

I would estimate that 90 percent of my time, whether it be in selling, buying, or redesigning fine jewelry, is spent working with gold and diamonds. While colored gemstones and platinum are exceptionally rare and desirable precious materials, nothing else comes close to the popularity of gold and diamonds in fine jewelry. Coincidentally, these two materials are experiencing unprecedented market volatility.

I reviewed this Blog page and noted my post from December 2019 regarding the launch of LightBox Diamonds, the first direct-to-consumer website offering lab-grown diamond jewelry. I knew then it was a momentous occurrence, but looking back, I am astounded at the rate of change, not only in the diamond business, but in the fine jewelry business since then.

When I began my fine jewelry advisory in 2018, the price of gold was $1,300.00 per ounce. This month it surpassed $3,000.00. As a personal shopper, I look at jewelry continually, yet I still get sticker shock from today's pricetags. Retail fine jewelers have been forced to either maintain their quality standards and raise prices accordingly, or offer gold jewelry that is of lighter weight, lower karatage, and lesser craftsmanship, to maintain salable price points. The ramifications to a jewelry business and its clientele are immense.

Last year, lab-grown diamonds represented one half of national engagement ring sales, up from six percent in 2019. Diamond studs, tennis bracelets, and tennis necklaces are other categories that have seen tremendous growth in lab-grown. Women love diamond basics they can wear every day, and because lab-grown and natural diamonds are physically, chemically, and optically identical, many buyers are opting for lab-grown to access higher carat weights of very high quality at more affordable prices.

I have read numerous opinions on the future of diamonds, some offered by the most influential and respected individuals working in the industry. Most of these people, who tend to be older men in multi-generational family businesses, simply cannot grasp the far-reaching disruption around them and are unable to adapt their traditional business models. They have forgotten that what the diamond buyer wants to buy is more important than what the seller wants to sell.

My predictions, therefore, on the future of gold and diamonds are worth just as much as anyone else's at this point. A few thoughts:

1. Prices for lab-grown diamonds at retail will continue to drop, but not as precipitously as they have over the past few years. Natural diamond prices will also continue to drop until they can offer a reasonable value proposition against their lab-grown counterparts. They have a long way to go at this point.

The benefits of natural diamonds must be much more clearly marketed and explained to consumers if this segment of the industry wants to stop the bleeding. They must create new desire for their product, which has enjoyed no real competition until now. Denigrating lab-grown diamonds as "fakes," which is easy to do and simply untrue, isn't smart in the long run.

2. Attitudes about diamonds will continue to evolve. I feel there is room for both natural and lab-grown, in the overall market and in one's own jewelry box. Without exception, my clients are delighted with their lab-grown diamonds, and every one of them also loves and enjoys their natural diamonds. Of my 2024 engagement ring clients, 80% elected to purchase lab-grown over natural diamonds. (I always present both options and let the client decide which works better for him or her.)

As consumer attitudes change, the attitudes of retail jewelers will change. For example, three St. Louis jewelers with whom I do business are now offering lab-grown diamonds for sale, all of whom said just a few years ago that they would never do so. As jewelers begin to offer both natural and lab-grown jewelry, shoppers will better understand their choices and I believe the market for diamond jewelry will actually expand overall.

3. The price of gold will eventually drop to a new normal. If the U.S. does not experience a recession in 2025, I'll estimate that $2,200- to $2,500-an-ounce will be the next landing zone. Of course, that number will be affected by how high the price of gold actually goes this time around.

Some investors in uncertain economies buy gold as a perceived safe place to park their money, even though the price of gold can drop as quickly as it rises. Until consumer confidence stabilizes, these investors will continue to buy gold, thereby creating demand, and it may continue to rise in price. How else can we explain the immediate and ongoing sellout of gold ingots at Costco?

On the plus side, it's a great time to be selling your unwanted gold jewelry. Or maybe you prefer to hedge your bets, wait a few months and see if it hits $3,500? It is a crazy time in the fine jewelry business right now -- that's probably the only certainty.