Will the growing demand for diamond jewellery lead to an increase in diamond prices?

The tradition of presenting a diamond engagement ring is the driving force behind the demand for diamond jewellery. In recent times, however, this custom is losing popularity, and therefore jewellery companies are trying to convince consumers to hand out diamond jewellery also for other occasions, such as the birth of a child, or the increasingly popular custom of presenting jewellery to oneself. This field shows success as the demand for this type of jewellery is growing. In addition, Millennials and Gen Z are becoming more prosperous in key markets and will generate strong demand for diamond jewellery in the coming years.

Diamond jewellery market

Grand View Research estimates that the 2018 diamond jewellery market was worth USD 87.31 billion and will continue growing by an average of 3% until 2030. The largest market, which generated nearly 52% of the total revenue, was the US. However, the importance of China and India is growing rapidly, where growth is forecasted to be 3.4% annually. Each of these markets is dominated by millennials. According to the estimates of De Beers Group - in the USA they are responsible for 60% of the demand for diamond jewellery, on the other hand, in China for 80%.

The largest representatives of the jewellery industry see this group as an opportunity to increase sales. De Beers Group, with 1 thousand stores, offers affordable prices to millennials, using smaller diamonds in jewellery and new products. At the same time, it integrates traditional brick-and-mortar stores with an on-line shopping platform and social media.

These activities are to bring spectacular success. It is estimated that last year the value of jewellery sales via the Internet amounted to USD 21.5 billion. This distribution channel is expected to grow by an average of 15.5% over the next 7 years, to the level of USD 58.9 billion. This is a nearly 174% increase in value. In 2027, it is estimated that Internet sales of diamond jewellery will amount to $ 46.2 billion, which will account for 78% of the online jewellery sales. Mainly Millennials and Gen Z in the US, China and India will generate demand thanks to increasing wealth.

Chart 1. Forecast of global online sales of jewellery in 2020-2027 (in billions of USD)

Źródło: Research and Markets

Demand for diamond jewellery among millennials and Gen X

Mining and jewellery companies rely heavily on millennials who, according to research, prefer to spend their extra money on travel. The theme of travel has become a natural narrative in marketing campaigns targeted at a new generation of customers. The path from the extraction of the precious stone to the moment the consumer puts on the finished product has become the most popular motif. According to experts, this way of building the need for a diamond is to naturally bring young consumers closer to buying jewellery.

According to Bain & Company’s estimates, in 2019, the total income of Millennials and Generation Z was $ 12 trillion in the US, China and India. Analysts forecast it will double to USD 25 trillion within 10 years.

Therefore, it is worth bearing in mind that both analysts’ forecasts and marketing campaigns aimed at millennials may result in an increase in the demand for diamond jewellery.

Diamond market expert Edward Jay Epstein points out that the diamond is the second most desirable item in American households after television.

Figure 2. Projected change in millennial and Gen Z income between 2019 and 2030 in selected countries (in trillion USD)

Source: The Global Diamond Industry 2019, Bain & Company

Diamond jewellery production process and the natural environment

The new generation of diamond jewellery consumers appreciate the practical aspects of life, but do not forget about environmental protection either. The contemporary society awareness of the importance of caring for the surrounding nature is constantly growing. This does not only apply to waste segregation, but also to the selection of products that leave the smallest possible carbon footprint in the production process, and whether their packaging is made of biodegradable materials. The subject of environmental protection is also playing an increasingly important role among consumers and producers of diamond jewellery.

Millennials and Generation Z want to be sure that the diamonds and jewellery they are buying are mined and produced in the least environmentally harmful way. Solutions based on blockchain technology, artificial intelligence, and cybersecurity, such as TRACR or Everledger, come to the rescue.

When diamonds are mined, a digital record is created containing the country of origin and their authenticity. From now on, the diamond is assigned a digital record at every stage, from production to the final consumer. By checking the diamond against its record, you can verify its history and the impact that its extraction has had on the natural environment and the local community.

Consumers want to be sure that the jewellery they buy was produced with respect for the natural environment, contributed to the development of the local community and does not come from the regions affected by the war - The Kimberly Process.

Consumers expect diamond mining companies to implement programs to minimize environmental impact and provide local community with welfare support now and after the mine is closed.

Will the growing demand for diamond jewellery lead to an increase in the price of these stones?

This question cannot be unequivocally answered because diamonds differ in many respects. The prices of diamonds in fancy colours, which have been enjoying a growing interest among jewellery store customers for several years, are likely to increase. Until recently, they were little known among consumers and investors. Now is their time! Due to limited supply and availability on the secondary market, their prices are rising. When it comes to colourless stones, the prices of diamonds in less popular shapes, e.g. cushion, are rising.

Each diamond is different, so when buying diamonds for investment purposes it is worth diversifying your collection by collecting a variety of diamonds.

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Fancy Colour Diamonds

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