I actually read the famous "Have You Ever Tried to Sell a Diamond?"[0] by The Atlantic over 30 years ago and since then, there have been multiple predictions of diamond prices collapsing. (Various reasons given such as Russia, China diamonds flooding market, synthetic diamonds, used diamonds, etc).
And yet based on some quick googling, diamond prices exceed US inflation when comparing year 2000 to 2016. The reported diamond price of $30925 exceeds inflation calculation of $21045.[1][2]
There seems to be a fundamental flaw of in the mental model of everyone predicting that diamond prices will crash. It would be interesting to hear a theory on why it never happened. I don't think the answer is as simple as "DeBeers marketing and supply restrictions" because there are a many diamond supply chains they don't control.
> There seems to be a fundamental flaw of in the mental model of everyone predicting that diamond prices will crash. It would be interesting to hear a theory on why it never happened.
I would guess the flaw is the same as in the theory that bitcoin will crash to zero.
If you ask me to formulate the flaw based on my way too cynical worldview, it would be something like "massively underestimating the amount of people who have zero clue about what they actually are buying"
Maybe a rather irrational and uninformed market together with the retail sellers keeping the prices up? As a regular person you have to trust the seller, so you're not going to buy a cheap diamond on Ebay or something like that. So there might be enough power to set the price with the established jewelers .
It also seems to be a market that is mostly based on marketing, so it is maybe more similar to something like designer items where the name on it provides the perceived value, and not the material.
Excellent premise. I would add that most such predictions fail to account for dollar value in parity with other currencies, securities, and assets.
Even an apparent drop in physical value mainstays like gold and diamonds may be coexistent with a corresponding drop in Dollar Value, negating some or all of the loss in value, so long as the investor keeps his/her investment valued in dollars (as is the case for most US investors).
i don't know diamonds as gems in particular but I can guess that branding might make a difference. I can buy a plastic key chain for $1-$5 at some store. I can go to the Prada store and they sell plastic key chains for $600. I'm not going to argue whether or not the design is better, only that that someone is willing to pay $600, I'm guessing to show off they spent $600. And of course that's not even close to the expensive items in the store.
And yet based on some quick googling, diamond prices exceed US inflation when comparing year 2000 to 2016. The reported diamond price of $30925 exceeds inflation calculation of $21045.[1][2]
[ Screenshot in case Statistica puts graph behind paywall: https://imgur.com/a/pOgsyy5 ]
There seems to be a fundamental flaw of in the mental model of everyone predicting that diamond prices will crash. It would be interesting to hear a theory on why it never happened. I don't think the answer is as simple as "DeBeers marketing and supply restrictions" because there are a many diamond supply chains they don't control.
[0] past discussions: https://hn.algolia.com/?q=sell+a+diamond
[1] https://www.statista.com/statistics/279053/worldwide-sales-o...
[2] https://www.usinflationcalculator.com/