Why Are Diamonds So Expensive?

Diamonds are forever. This is how they got that way.

Why Are Diamonds So Expensive?

The 14-carat Pink Star Diamond is the world's largest flawless pink diamond and sold for $26.6 million in 2020.

If you’ve shopped for expensive jewelry, you’ve probably contemplated buying something with diamonds. And you may have balked at the price. According to The Knot 2020's Jewelry and Engagement Study, the average cost of an engagement ring is $5,500.

But why are diamonds so expensive? Many people point to market manipulation. And that’s true. Still, you can’t simply restrict supply and demand to make something sell for thousands of dollars when it has no intrinsic, or even resale, value.

While diamonds have had a long history with the crowns of kings and queens, they were never as rare as perceived. In fact, diamonds are plentiful. That was discovered in the 19th century, when the mineral became the most coveted gemstone in the world.

This is why diamonds are so expensive and why they shouldn't be expensive.

Diamonds Have Been Prized Nearly Forever

In 77 A.D., Pliny the Elder in his histories wrote that "the substance that possess the greatest value, not only among the precious stones, but of all human possessions, is adamas, a mineral which, for a long time was known to kings only, and to very few of them."

Adamas, meaning invulnerable in Latin, is where we get the name diamond. However, it's not entirely clear if adamas meant the same diamonds we know today.

Diamonds had been discovered long before that, with the first descriptions of the gemstone emerging in India during the fourth century B.C. For centuries, they were believed to be found only in India and were believed to be rare.

And that supposed rarity made diamonds a treasure.

But So Were Other Shiny Gemstones

Ancient Roman necklace — A pastiche of an ancient Roman necklace with materials thought to be from the first century B.C. to the first century A.D.

It's not entirely clear if diamonds were prized more so than other gemstones in the ancient world. But like today, diamonds were sought-after because they were pretty, just like jasper, amethyst, jade, and other gemstones.

The ancient Greeks imported precious stones from India. From the writings of Herodotus (circa 484 B.C. to 425 B.C.), we can glean that precious stones were on display in ancient temples and palaces.

Eventually, gemstones became part of the dress in the ancient world.

Romans Wore Diamonds and Other Stones

Ancient Roman earrings — Roman earrings from the late first century B.C. to the second century A.D. that were made of gold with agate beads.

At one point in time in ancient Rome, diamonds and precious stones became part of fashion.

According to Todd Cleveland's "Stones of Contention: A History of Africa's Diamonds," after the Roman empire expanded into Asia Minor in the first century B.C., gemstones poured into Rome. Apparently, there were enough gemstones in the market to render them affordable, which led to Roman citizens incorporating them into their dress.

Cleveland writes that eventually wearing gemstones became illegal in Rome. He doesn't say when, exactly, but given that the ancient Romans once outlawed pants, it's believable.

Diamonds Once Took a Back Seat to Other Gems

Uncut and unpolished diamond — An uncut and unpolished diamond.

Skip forward a millennium. During the Late Middle Ages, Europeans were using all kinds of gems for decoration. But they didn't particularly like diamonds because they didn't sparkle like other stones.

Prior to the mid-15th century, diamonds were bought and sold as uncut, or crudely cut, gems. An uncut diamond is relatively unspectacular and therefore had less aesthetic value than something like a sapphire, and was therefore valued less.

But diamonds were sometimes preferred by people in high places.

Diamonds Were Marks of Royalty

Louis IX statue — A statue of Louis IX at the Basilica of the Sacred Heart in Paris, France.

By the 13th century, Louis IX of France loved diamonds so much he would have heavy, diamond-encrusted outfits made specifically for him.

Louis IX only wanted royalty associated with diamonds. He even went so far as to make a sumptuary law prohibiting anyone else from wearing the stone, just in case they could afford it.

He was sort of a trendsetter. Keep in mind, this was before diamonds were cut correctly, so they didn't dazzle and shine like we're used to.

Enter Lodewyk van Bercken, Diamond Cutter Extraordinaire

Diamond cutters — Unidentified diamond cutters at the Denrose Diamond Co. factory in New York City in 1981.

That all changed sometime around the 1460s, when a Flemish jeweler and gemstone cutter named Lodewyk van Bercken figured out how to successfully cut a diamond to show its true brilliance. While cutting diamonds had been attempted in India, those lapidaries couldn't quite figure out how to cut the precious stones the right way.

Van Bercken figured out how to both cut the diamond correctly and also invented the scaif, a diamond-polishing wheel which allowed the diamond to shine and refract light in all its brilliance.

The Hope Diamond Brought Bling to Another Level

In 1668, a French merchant named Jean Baptiste Tavernier sold France's King Louis XIV — apparently a diamond fanatic — a huge, steel-blue diamond that would later be known as the Hope Diamond.

Louis XIV had the diamond, which was then larger than 67 carats (it's now 45.52 carats), set in gold and attached a red ribbon to it, making a necklace. He wore the diamond to special occasions.

This helped popularize diamonds even more. When people see other people in higher positions wear something, it starts a trend. Just ask Meghan Markle.

Diamonds Became Popular in France

England's King George IV commissioned the Diamond Diadem, which is now a well-known symbol of the country.

Louis XIV’s penchant for diamonds and new types of diamond-studded jewelry spread to the regular public.

Joan DeJean in "The Essence of Style: How the French Invented High Fashion, Fine Food, Chic Cafes, Style, Sophistication and Glamour" writes, "For the first time, shopping for fine jewelry became an integral part of the Parisian experience" in the 17th century. At least for the aristocrats and those wealthy enough to afford them.

So, too, did the diamond boom spread around the world. After diamond mines in India were exhausted, a mine in Portugal-controlled Brazil was discovered in 1725. The diamond trade shifted from one area of the world to the other, opening up new trade routes and new customers.

King George Went Into Debt for Diamonds

King George IV cariacture by James Gillray — A 1792 caricature by political cartoonist James Gillray from when George IV was Prince of Whales. Scandal, excess and financial irresponsibility marked George IV's reign.

You know how it's a really bad idea to take out a loan for something as useless as jewelry? Well, if you do, you're fiscally smarter than England's King George IV.

By the 18th century, diamonds were so coveted by the elite that King George IV took out, on loan, 12,314 diamonds for his own personal crown at his coronation ceremony. The amount? Sixty-five thousand pounds — more than $10 million U.S. today — at 15 percent interest.

He couldn’t hope to pay the loan back, and despite pleas to Parliament to just go ahead and buy him the crown, he was eventually forced to unset it and return the jewels.

South African Diamonds Changed Everything

But the general public still wasn’t buying diamonds. "Diamond ownership remained very much an aristocratic frill" until the late 19th and early 20th century, wrote Stanford history professor Robert Proctor in his research paper, "Anti-Agate: The Great Diamond Hoax and the Semiprecious Stone Scam."

But in 1866, a 15-year-old boy picked up a 22-carat diamond — now known as the Eureka Diamond — by the Orange River, located near Hopetown, South Africa.

Also in the 1860s, an English prospector discovered massive diamond mines in Kimberley, the capital city of Northern Cape. It would change everything.

'Democratizing' Diamonds

Right after the Kimberley mines were discovered, a glut of diamonds from South Africa flooded the world market, causing diamond prices to fluctuate — even plummeting to "a few shillings per carat," according to Proctor.

Diamonds were "'democratized' to a certain extent," according to Proctor. If diamonds were to go back to being coveted for their rarity — a belief that had just been debunked — something would have to change, or else diamonds would become basically worthless.

Enter Cecil Rhodes.

Cecil Rhodes Was the Man Who Changed the Diamond Industry Forever

Cecil Rhodes statue — A statue of Cecil Rhodes, the founder of the diamond company De Beers, was removed from Cape Town University in Cape Town, South Africa, in 2015.

Rhodes was a British imperialist, politician, and mining magnate. He served as the prime minister of Cape Colony from 1890 to 1896. He was also a racist who believed Anglo-Saxons were the "master race," and critics say he helped pave the way for apartheid.

Rhodes formed the diamond company De Beers in 1888. He knew the only way for diamonds to retain their value was a strict supply control, so he bought out larger and larger diamond mine claims, essentially stomping out the competition.

The Atrocities in the African Diamond Mines Were Horrifying

Premier Diamond Mine in South Africa — A photo of the Premier Mine in South Africa taken between 1890 and 1923. The Premier Mine has produced some of the largest diamonds in the world.

De Beers employed draconian measures like hiring convicts at a fraction of the cost of other employees, housing its 10,000-strong Black miners inside prison-like barracks, and even forcing workers to ingest laxatives so their excrement could be searched for swallowed diamonds, according to "Glitter & Greed: The Secret World of the Diamond Cartel" by Janine Farrell-Robert.

De Beers controlled almost all the world’s diamond trade — and through the oncoming decades, would continue to do so. It wasn't until the 1980s, when De Beers' market share was near 90 percent, that its stranglehold weakened.

'I Am Going to De Beers ...'

Diamond miners in South Africa, 1911 — Diamond miners at the bottom of a shaft in the Wesselton Mines located in Kimberley, South Africa. The photo was taken circa 1911.

South African mine laborers from Lesotho sang this merry song — extracted here from Cleveland's book — while going to work at the diamond mines:

Death does not choose; famine chooses. ...

I am going to De Beers. ...

Lad, the day I am going, I mount to ride away,

A woman of witchcraft was already hard at work;

I saw her early going to the graveyard,

She puts on a string skirt fastened with knots,

She takes the arm of the corpse and waves it,

A mouthful of blood, she spits into the air,

She says, "Men gone to De Beers.

They can come home dead from the mines."

To me ... I am not dead; even now I still live, I am a wanderer of the mines.

Some Africans migrated from impoverished areas to diamond-mining towns, while others were forcibly coerced into the depths.

Diamonds Lost Their Luster During the Great Depression

Diamond ad — This 1947 print ad created by the N. W. Ayer advertising agency was part of a huge ad push by the diamond industry in the 1940s.

Up until the 1930s, diamonds weren’t tied to the image of forever-lasting love and a multifaceted way to show off wealth. Ironically, it would be because of the Great Depression that diamond prices later skyrocketed.

In 1929, a man named Harry Frederick Oppenheimer controlled De Beers (his father, Ernest Oppenheimer, had taken control of the company from Rhodes). When the Great Depression hit, the diamond market was in trouble. Knowing that diamonds wouldn’t be selling nearly as much, Oppenheimer drastically restricted the number of diamonds being produced, but that measure alone wasn't enough to save the industry.

The diamond trade declined worldwide.

Diamonds Get a New Shine Through Advertising

A Diamond Is Forever original ad — A De Beers ad from 1947 with the iconic "A Diamond Is Forever" tagline.

The perception of diamonds around the world at this time varied. In England and France, diamonds were mostly considered jewels for the elite. In many places in Europe, the diamond engagement ring wasn't even a thing yet. In the United States, prior to World War II, only 10 percent of all engagement rings had a diamond.

Diamonds were falling out of favor due to shifting fashion trends. Twenty years after World War I ended in 1919, the total amount of diamonds (measured in carats) dropped by 50 percent, according to Edward Jay Epstein's classic 1982 article, "Have You Ever Tried to Sell a Diamond?"

In 1938, Oppenheimer went to N. W. Ayer, an advertising agency in New York City, and hired them to put some polish on the diamond’s out-of-vogue image.

And, oh boy, the lengths they took to do so.

The Campaign Began With Hollywood

Paramount Pictures changed the title of its movie "Diamonds Are Dangerous" to "Adventures in Diamonds" as part of a deal with De Beers.

To get diamonds back to their royal roots, Ayer targeted the new royal family: Hollywood. Ad men tried to weasel diamonds into the scripts themselves and decorated actresses in diamonds.

According to Proctor: "In 1941, for example, Paramount Pictures was cajoled into changing the title of its 'Diamonds Are Dangerous' to 'Adventures in Diamonds’ — following a De Beers promise to advertise the film in jewelry shops across the country."

So, too, did the ad agency attack the print market: "By 1940, the Ayer agency had placed 3,500 diamond movie stories and 16,500 diamond news stories in magazines such as Brides, Reader’s Digest, and the New York Evening News," writes Proctor.

De Beers Made a Fortune Off World War II

Diamonds in hands — An artisanal miner shows the diamonds he and his group found in an abandoned mine in Areinha, Minas Gerais state, Brazil. The area has been explored for the precious stone since the time of slavery.

One of the worst offenses of De Beers may have been using World War II to profit off of Americans. After America entered World War II in 1941, there wasn’t much reason for people at home to buy diamonds — most spending money went toward American-made goods to help the war effort.

You know what didn't help the war effort? Buying diamonds from De Beers.

You know what De Beers and its ad agency said would help the war effort? Buying diamonds from De Beers.

Ayer ran an annual $500,000 advertisement campaign during World War II. Ads included titles such as "Diamonds and the Call to Arms," "Fighting Diamonds," "Jewelry Jeeps," and "How Diamonds Spark the Wings of War and Peace." Worse still, De Beers had no need to mine more diamonds during this time, as it had already produced any kind of useful, practical diamonds that could be sent overseas.

"Its vaults were full," writes Farrell-Robert. "It had closed the mines that produced both gem diamonds and the diamonds most needed for the war effort, keeping open only the Congo mines that produced at the cheapest cost the poorest quality industrial diamonds."

While the Justice Department quickly investigated De Beers for war profiteering, it didn’t matter. According to Farrell-Robert, the company "declared a 100 percent increase in dividends in 1940 and 1941" and "made a fortune" from its WWII campaign.

Ad Men Infiltrated Schools and Taught Bogus History About Diamonds

1951 classroom — A picture of a grammar school taken in San Francisco, 1951. Ad men infiltrated schools throughout the country, teaching bogus lectures about the history of diamonds being used in marriage.

Another 1947 campaign switched gears from the more indirect approach of diamond-flashing movie stars and the traditional campaigns of print and television to infiltrating the American public-school system itself. Ad men targeted, and then visited, girls' schools throughout the United States.

"They addressed school assemblies, spreading the message that a girl is not truly engaged until she wears a diamond. They justified this by quoting an invented 'ancient history' for the diamond engagement ring," writes Farrell-Robert. All of this was bull.

In an internal memo to De Beers, N.W. Ayer stated, "All of these lectures revolve around the diamond engagement ring, and are reaching thousands of girls in their assemblies, classes and informal meetings in our leading educational institutions."

What better way to create value than to invent some propaganda and teach it right before chemistry?

When Did Diamond Engagement Rings Actually Start?

Sarah Ferguson's engagement ring with Prince Andrew — Prince Andrew shows off the hand of his then-fiancé, Sarah Ferguson, which has a diamond-encrusted engagement ring. This photo was taken in 1986. The two divorced in 1996.

Diamonds were not, historically, the symbol of love. It's all a bunch of brilliant advertising. In 1977, The New York Times ran an article about the first diamond engagement ring, which supposedly occurred in 1477, when Maximilian of Austria gave a diamond ring to Mary of Burgundy for her hand in marriage.

But this information came from the Jewelry Industry Council, which the Times described as "a 30-year-old New York-based trade organization with a penchant for retailing and for retelling history in romantic terms."

Also note the dates. The article ran exactly 500 years after the supposed engagement ring. The American Gem Society repeats this tale, while De Beers dates diamond rings as a symbol of unbreakable love back to 1286.

The truth is probably far simpler. Scholars have noted that engagement rings date back to ancient Rome and were "made of iron" and "unornamented by jewels; later, rings were made of precious metals and could include jewels and fancy engraving."

Diamonds Created a New Form of Advertising

Large diamond in mouth — A woman holds a large diamond in her mouth in what appears to be a promotional photo for a Sotheby's auction that took place in Geneva, Switzerland, in 1999. The diamond is 49.62 carats.

When you think of a diamond, you probably aren't thinking of De Beers or any particular diamond company. It's not like a Ferrari, or a Porsche, which are name brands. Diamonds are just stones. But when we think of a diamond, we immediately associate it to wealth. That was the idea that N. W. Ayer had — not to build the De Beers brand, but the product of its exploits.

In an internal memo, N. W. Ayer noted that it developed a campaign that required "the conception of a new form of advertising which has been widely imitated ever since. There was no direct sale to be made. There was no brand name to be impressed on the public mind. There was simply an idea — the eternal emotional value surrounding the diamond."

N. W. Ayer managed to make diamonds expensive because it managed to manipulate how people thought of diamonds without having to tell them directly. Although De Beers did some straight-up nefarious things to make diamonds the jewel of choice.

From One Month's Salary to Two Month's Salary for a Diamond Ring

Marilyn Monore in 'Gentlemen Prefer Blondes' — Marilyn Monroe sang "Diamonds Are a Girl’s Best Friend" in the 1953 film "Gentlemen Prefer Blondes"

In 1948, an Ayer copywriter penned one of the most famous slogans in advertising history: "Diamonds Are Forever." Alongside that, was another slogan: "Diamonds are a girl’s best friend."

Back in the 1930s, De Beers ran a campaign that advocated men spend one month’s salary on their engagement ring. By the 1980s, De Beers ran another similar campaign — only this time, a proper diamond engagement ring should cost at least two full months' worth of work. Together, the two campaigns were an astonishing success.

"These two achievements — making the diamond ring an essential part of getting married and dictating how much a man should pay — make it one of the most successful bits of marketing ever undertaken," Dr. TC Melewar, professor of marketing and strategy at Middlesex University, told the BBC.

Diamonds, Diamonds Everywhere

Jean Simmons and Stewart Granger — Actress Jean Simmons and her fiancé, actor Stewart Granger, in 1950 in Los Angeles, California. Simmons has a diamond engagement ring on her finger. Its details were probably on one of the lists to newspapers supplied by N. W. Ayer.

N. W. Ayer also created a weekly list of what kind of diamonds influential Hollywood personalities were wearing and distributed them to 125 newspapers. The newspapers that reported on it, further cultivating an association of diamonds with important people.

The onslaught of marketing, from the memorable slogans and getting Hollywood involved (Marilyn Monroe sang "Diamonds Are a Girl’s Best Friend" in 1953’s "Gentlemen Prefer Blondes") made diamonds a major element of American wedding culture.

According to Proctor, "Whereas early in the century almost no one in the United States owned a diamond engagement ring, by 1950 about half of all brides would receive one. By 1960 the figure had risen to nearly 80 percent. Even working-class brides were expected to be able to display a diamond."

Restricting Resale Value

Diamond necklace on display — A woman placing a diamond necklace on display in a jewelry store located in Johannesburg, Africa. The resale value of diamonds is fractional to its retail cost, which is a good indicator of just how much the stones are really worth.

"Diamonds Are Forever" wasn’t a slogan to just make you buy diamonds. It’s also designed to make you keep them. If anyone could make their money back — or even profit from — reselling their diamonds, the industry wouldn’t be able to demand top dollar.

Epstein found that selling a diamond proved extraordinarily difficult since "the buyer, not the seller, determined the price." People who spent thousands on diamond jewelry looking to resell them at jewelers were given fractions of the purchase price, while some shops would only trade on consignment or had a store policy against reselling diamonds. Even diamonds bought and kept during periods of high inflation barely gained value.

Epstein said the lowest end of resale value was around 10 percent in his 1982 article. A more recent story by Marketplace says you may get as low as 20 percent.

Lab-Grown Diamonds Are the Next Big Thing ... But De Beers Wants to Devalue Them

Synthetic, lab-grown diamond — This 3.04-carat diamond was the largest synthetic diamond in the world when the photo was taken in 2015. Now, diamonds as large as 15.32 carats have been grown in the lab.

Now lab-grown diamonds are encroaching the market. Surely, this will eliminate, or at least weaken, the diamond trade?

Not if De Beers has its way. The company completed a $100 million diamond-growing facility in Portland, Oregon, in 2020. It's producing around 200,000 carats of polished, synthetic diamonds and is marketing them under their millennial-focused fashion jewelry brand, Lightbox.

According to a 2018 Bloomberg article, a lab-made 1-carat diamond retails for $4,000. De Beers sells their lab-grown diamonds for around $800 a carat.

And here’s why: "Lab-grown are not special, they’re not real, they’re not unique. You can make exactly the same one again and again," De Beers CEO Bruce Cleaver told Bloomberg. De Beers said they would not grade their lab-grown diamonds because they "don’t think they deserve" it.

In other words: Real diamonds are unique and special — just like your relationship. Those lab-made diamonds? They’re factory-produced, common, boring — and De Beers wants to corner the market on them.

Will Diamonds Stay Expensive?

The Lesedi la Rona diamond, the fourth-largest diamond ever found, is 302.37 carats.

Diamonds will forever stay expensive as long as people pay for them, but that might be changing. Worldwide diamond sales hit a record $82 billion in 2017. But in 2020, De Beers' sales dropped by a third from 2019. A 2019 Bain and Company report expected global diamond sales to drop by 2 percent.

Where diamond sales will be in the future is yet to be seen. It's also too early to tell how much of a hit mined diamonds will take from lab-grown diamonds, but it will be interesting to watch.