Diamonds — a girl’s best friend
By Carmel Fisher
10 November, 2017
I’m pleased my husband focused on the ‘L’ word rather than the ‘I’ word when shopping for my engagement ring.
We were barely out of university when we went in search of a ring to signify our love’s endurance. We knew it should be a diamond and my husband should spend as much as he could afford; two months’ salary was the norm.
We didn’t think about alternative uses for the money, and we didn’t question whether a diamond was the right gem. We somehow just knew diamonds were an established symbol of love and status.
Had my husband been aware of the ‘great diamond heist’ — an industry developed by a monopolist with a great marketing campaign — he might have been less inclined to follow the norm.
Certainly if he had stopped to think about diamonds as an investment, he may have suggested settling for a wedding band. Gold has, after all, functioned as an investment and a store of value for hundreds or even thousands of years.
Diamonds are a relatively recent obsession for mankind. While supposedly a billion-year-old precious gem, diamonds were not considered particularly special until De Beers began their famous marketing campaign in the 1940s.
The discovery of substantial diamond sources in the second half of the 20th century increased their supply and reduced their desirability.
Diamond cartel DeBeers sought to maintain the price and exclusivity of diamonds by steadily purchasing diamond mines across the globe. Before long, they controlled diamond supply and managed stockpiles in order to maintain the perception of scarcity.
In 1938 DeBeers partnered with advertising agency N.W. Ayer & Son to “impact social attitudes of the public at large” and channel American spending towards larger and more expensive diamonds instead of other “competitive luxuries”.
De Beers promoted diamonds as a symbol of everlasting love and a permanent store of value. Their advertising campaign featured movie idols — paragons of romance for the mass market — and even royalty to promote diamonds as a symbol of status and love.
People began buying them, believing they were valuable and scarce. The demand became self-fulfilling and, even as the supply of diamonds increased and De Beers lost their monopoly, the diamond price rose fairly consistently over the next 70 years.
Reality has borne witness to the myth created, with diamonds remaining an expensive (as opposed to valuable) gemstone and people still associating diamonds with marriage and everlasting love. Today more than 80 per cent of American women receive diamond rings on their engagement.
Despite their continued popularity, diamonds are not that flash as an investment. Well, unless it is the Pink Star, the most expensive diamond ever sold at an eye-watering £55 million ($NZ104 million).
Diamonds are limited in their investment appeal because they are illiquid and can be replicated. Man-made diamonds can be cultivated to have the same chemical and physical composition as mined ones, indistinguishable to the naked eye.
Right now the natural mined diamond industry is huge at $US80 billion but man-made diamonds are gathering momentum, with sales expected to increase to $US1 billion by 2020.
Given their lower cost and unlimited supply, man-made diamonds may be the death knell for what has been a marketer’s dream. The natural diamond industry relies on people continuing to perceive ‘real’ diamonds as valuable.
Romance may trump logic. After all, which wife wants to hear: “Darling, here’s your synthetic diamond, I saved a bundle”?