Understanding Lab Grown DIamonds

Lab grown diamonds have recently exploded in interest and exposure, but it remains to be seen where pricing and value will settle long-term. For those interested in purchasing a lab grown diamond, it is worth examining the lab grown market to better understand why lab grown diamonds cost less than natural diamonds, and where prices may go.

The current growth in lab grown interest stems from a confluence of consumer and supply side factors. On the consumer side, their decreased ecological impact and lower financial cost relative to natural diamonds make them an increasingly appealing alternative. On the supply side, technology has finally reached the point where high-quality lab grown diamonds can now be affordably produced in large, consistent quantities.

In terms of their physical makeup and application within a piece of jewelry, we view lab grown diamonds just the same as natural diamonds. Unlike simulants that approximate a diamond, common ones being moissanite or cubic zirconia, lab grown diamonds look and behave like natural diamonds because they are molecularly the same. They are the result of the same conditions that create natural diamonds, only people have artificially applied those conditions instead of them arising naturally. So, at an aesthetic level, and for us as designers and producers of jewelry, at a functional level, they are one and the same.

Considering this, it is easy to envision a large-scale shift away from natural diamonds and an adoption of lab-grown diamonds as the de facto engagement gemstone of choice. While this could be a possible long-term outcome, it is far from certain, and until everything plays out consumers will be forced to assume the risk of this uncertainty.

Natural diamond costs over the past handful of decades have been rather stable, allowing them to be viewed as a good store of value, and this is predominantly due to 2 limiting factors. The first is that it is exceptionally capital intensive to create a functioning and viable diamond mining company. The second is that even if you can clear that first hurdle, you need to have access to diamond mines, which are finite, geographically constrained, and largely already claimed by existing diamond mining companies. Because of these 2 factors, the production and supply of natural diamonds is predictable and stable.

Lab grown diamonds do not share this long-term stability yet, nor the constraints. Lab grown diamond production is the result of ever-improving technology, which is continuously decreasing costs and increasing output efficiency. It's easier than ever to create a functioning and viable diamond growing lab. Because the diamonds are grown and not mined, the limited amount of diamond mines and presence of existing companies does not apply at all, and labs can essentially be set up anywhere and with significantly less capital investment.

Without any natural constraints on lab grown diamond, there is the persistent potential for the market to be flooded by a level of production that far outpaces demand. This could drive lab grown diamond prices down exceptionally low (think of how precipitously the cost of flat screen TVs has fallen). Increased accessibility to diamonds is a positive, but it also exposes consumers to the risk that something they purchase one day could be worth significantly less the next. While this would not diminish the sentimental value, nor the positive physical traits of lab grown diamonds, it could de-stabilize the lab grown diamond market. The appeal of natural diamonds as a stable store of value would not apply, and under such a circumstance lab grown prices could be subject to large fluctuations in price as suppliers contract and expand responding to consumer demand, which is itself responding to the supply side, creating a feedback loop.

Because technology exists to differentiate natural and lab grown diamonds, there is a likelihood that under such a circumstance, a stratification would take place. While the broad diamond category would become more readily available, natural diamonds would become scarce relative to the flood of lab grown diamonds and effectively become a super-luxury item akin to an original artwork, while lab grown diamonds would fall into a category comparable to reproductions and prints despite maintaining the same visual appeal as a natural diamond.

At present, lab grown diamonds offer a great financial savings relative to natural diamonds and appear to have a smaller ecological footprint, which is a global positive. Within jewelry, they function and appear the same. What remains to be seen is the stability of their pricing, stemming from the supply not having as much constraint as natural diamonds. There isn't a right or wrong decision when it comes to selecting between natural and lab grown diamonds but understanding the differences between the two can allows for a more informed decision, just as understanding how a ring is constructed or diamond characteristics manifest can enhance the overall engagement ring buying process.