Diamond Prices Are Crashing: Lab Diamonds Are the Reason, An Market Analyst Explains What This Means for Your Natural Diamond’s Value.

Diamond prices have been sliding, and the main reason isn’t a mystery: lab-grown diamonds have changed the economics of the entire category. As a market analyst, I’ll explain why this is happening, how lab-grown supply pressures natural diamond pricing, and what it means for the value of the stone you already own or plan to buy.

What changed: lab-grown flipped the diamond market

Natural diamonds behave like a luxury good with a constrained supply. Mining is capital-intensive, slow to expand, and hostage to geology. That scarcity underpinned prices for decades. Lab-grown diamonds are different. They are grown in factories using CVD or HPHT reactors, which means capacity can scale with orders and investment, not with new geological finds.

Once a product can be made in a factory, its long-run price tends to follow the cost of production. In lab-grown, that cost has fallen as reactors improve, yields rise, and energy usage per carat drops. Every wave of efficiency brings lower wholesale prices. Retailers then pass part of those drops to consumers to stay competitive. The result is a rapid repricing of what consumers are willing to pay for a diamond at a given size and quality.

How lab-grown drives price declines

• Expanding supply at falling cost: Lab-grown capacity can be added with new reactors and shifts. As throughput improves, the marginal cost of another carat keeps falling. That puts persistent downward pressure on lab-grown prices.
• Direct substitution: Many buyers choose between a lab-grown and a natural diamond for the same budget. When lab-grown prices drop, consumers either spend less for the same size or upgrade size/quality for the same money. Either way, demand for natural at previous price points softens.
• Retailer incentives: Retailers often earn higher percentage margins on lab-grown than on natural. That nudges sales associates to present lab-grown as the “better value,” accelerating the shift in consumer preferences. When display cases tilt toward lab-grown, natural moves slower and must discount to sell.
• Premium compression: Historically, natural diamonds earned big price premiums for higher color and clarity. Lab-grown makes top grades common and affordable. When a flawless D-color lab-grown costs far less than a lower-grade natural, the premium for high grades in natural compresses.
• Transparency and comparability: Diamonds are standardized by 4Cs and grading reports. That standardization makes it easy for shoppers to compare natural versus lab-grown. Transparent comparisons increase price sensitivity and reduce brand-driven pricing power for undifferentiated stones.

What’s happening to natural diamond prices right now

Since the post-lockdown boom in 2021–2022, polished natural diamond prices have declined, especially in the 1–2 carat sizes common in engagement rings. Think double-digit declines on average, with steeper drops in categories that lab-grown targets most directly (rounds, near-colorless, VS–SI clarities).

On the rough side, major producers cut prices and throttled sales volumes in 2023–2024 to stabilize the market. That helped, but it did not reverse the structural demand shift caused by lab-grown’s pricing. Wholesale buyers remain cautious, and inventory turns are slower than before lab-grown went mainstream.

At retail, natural prices are sticky on the way down because stores anchor to past tag prices and appraisals. Yet deals are more common. The practical effect: the price you can sell for (or trade-in for) has dropped faster than the price you still see on many tags.

Your natural diamond’s value: what to expect

The hard truth: for most non-rare natural diamonds, resale value was never strong, even before lab-grown. Today it’s weaker. Here’s why and what it means in practice.

• Replacement cost vs. resale price: Appraisals used for insurance show replacement cost, not what a dealer will pay you. Replacement costs are falling in many categories. If you insured a ring based on 2021 prices, you may be overpaying premiums today.
• Typical resale ranges: A common, unbranded 1 ct round natural (G–H color, VS2–SI1) might fetch 25–50% of current retail if sold to a dealer, depending on market conditions and the stone’s cut quality, grading report, and liquidity. In softer periods, it can be lower.
• What holds value better: Exceptional cut quality, rare sizes (big, but still well-cut), truly rare colors (natural fancy pink, blue), or stones with strong provenance tend to hold value better. Mass-market grades face the most pressure because lab-grown substitutes are closest.
• Premium compression in action: If a top-clarity, top-color natural once commanded a large premium over mid-grade, that premium has narrowed. Buyers who accept lab-grown often prefer flawless or near-flawless at a fraction of the natural price, pulling demand from high-grade natural and flattening the price curve.

If you already own a natural diamond

• Update your appraisal: Ask for a market-based appraisal that reflects current replacement costs. This can reduce insurance premiums and aligns expectations if you ever need to replace the item.
• Keep documentation: Store the grading report, invoices, and any branding/provenance. Liquidity is better when paperwork is complete.
• Don’t expect investment returns: Treat it as jewelry, not a financial asset. Most natural stones will not appreciate from current levels unless they are genuinely rare or collectible.
• Consider remounting, not reselling: If you’re dissatisfied with style or size, redesign the setting. You preserve personal value while avoiding the steep discount of a resale.
• If you must sell: Get multiple bids (dealers, consignment, auction). Each has trade-offs:
  • Dealer buyout: Fast cash, lowest price.
  • Consignment: Higher potential, slower, fees apply.
  • Auction: Good for notable stones; fees and reserves matter.

If you’re buying now (natural or lab)

• Decide what you value: If symbolism of rarity matters, buy natural—but negotiate. If size and sparkle per dollar matter most, lab-grown offers extraordinary value.
• Prioritize cut quality: Cut drives beauty. A well-cut stone (natural or lab-grown) outshines a larger but poorly cut stone. Ask for images, light performance data, or trusted cut parameters.
• Check trade-in policies: Some jewelers offer lifetime upgrades on natural diamonds; lab-grown policies vary widely and often exclude buybacks. If future flexibility matters, get the policy in writing.
• Beware inflated appraisals: Ensure appraisals reflect realistic replacement costs today, not yesterday’s peaks.
• Expect further lab-grown declines: Lab-grown prices can fall more. Don’t stretch on lab-grown expecting resale—assume low to negligible buyback value.

Why this isn’t just a “bubble” that will pop

Bubbles burst when prices detach from fundamentals. Here, the fundamental has changed: how diamonds can be produced. As long as lab-grown manufacturing continues to improve and scale, lab-grown prices will gravitate toward production costs. That anchors the consumer’s reference price for a one-carat, colorless, sparkling diamond—regardless of origin.

Natural diamonds still have intrinsic scarcity, but scarcity must meet demand at a price. When a visually similar alternative is far cheaper, many buyers shift. That resets the demand curve for natural at almost every mainstream size and grade.

Scenarios for the next 3–5 years

• Bifurcation: The market splits. Lab-grown becomes the volume choice in bridal and fashion. Natural repositions as a luxury collectible with more emphasis on provenance, branded cuts, and rare categories. Prices stabilize for truly scarce natural goods; mid-grade natural remains pressured.
• Producer discipline: Rough producers manage supply more tightly, supporting polished prices. This prevents freefall but cannot fully offset the substitution effect from lab-grown.
• Retail consolidation: Retailers refine assortments. Some focus on lab-grown value. Others double down on natural storytelling, certification, and upgrade policies. The middle thins out.
• Technology drift: Continued improvements in lab-grown yield, color/clarity control, and post-growth treatments push costs down further, sustaining lower lab-grown prices.

Frequently asked questions I hear from clients

• Will natural diamond prices “come back”? Broadly, not to prior peaks for mainstream grades. Select rare natural stones may recover or appreciate, but that’s a different, collector-driven segment.
• Should I trade my natural for a larger lab-grown? Only if you value size/value over rarity and accept near-zero lab-grown resale. Financially, trading a depreciated natural for a lab-grown rarely maximizes dollars recovered; emotionally, it may be the right call for some.
• How much has lab-grown fallen? Wholesale lab-grown prices have dropped dramatically over the last few years as capacity scaled—think large double-digit percentages—while retail still lags those declines. Expect further erosion as production improves.

Bottom line

Lab-grown diamonds changed the reference price for brilliance and size. That reshaped demand for natural diamonds and pulled prices down, especially in common sizes and grades. Your natural diamond still has beauty and meaning, but as an asset it is unlikely to appreciate. Manage it like valuable jewelry: keep documentation, insure it appropriately, and enjoy it. If you are buying, be clear about what you value—rarity or value-for-money—and purchase accordingly, with a sharp eye on cut, policies, and realistic expectations for future prices.