Should We Separate the Markets for Natural Diamonds and Lab-Grown Diamonds?

A lab-grown diamond may look like a natural diamond, but their respective markets are very different. Industry experts warn that researchers will soon know how to grow a diamond that is indistinguishable from a mined diamond. That has raised important questions about the markets for natural diamonds and lab-grown diamonds.

Should these gems be grouped together in the same market? Or should the markets for natural diamonds and lab-grown diamonds be separate?

The problems with one market

This clash is something that has people on edge. Some are excited at the prospect of an unending supply of beautiful, low-cost, and climate-friendly gems becoming available. Others fear that their expensive natural diamonds will lose value. Appraisers and jewelers who evaluate diamonds already in the hands of the public worry that they may misidentify a stone, leading to a massive error in valuation. Lastly, some consumers have experienced such a loss of trust that they are turning away from diamonds entirely, instead gravitating towards gems whose origins be assured.

At the JCK show this month, many diamond dealers, both those selling natural gems and those specializing in synthetic inventory, shared the sentiment that the best way to deal with this issue is to keep the two products as separate as possible. However, it is interesting that those exclusively selling natural diamonds expressed an urgency about the topic that synthetic diamond dealers don't share. 

I spoke to Kunal Shah of Pristine Gems about this issue. In addition to running his company, which specializes in fancy-shaped mined diamonds, Mr. Shah currently serves on the board of directors of the Indian Diamond & Colorestone Association (IDCA), a not-for-profit organization founded in 1984 that promotes, among other things, ethical business transactions between its members and the United States. 

The case for separate markets

When speaking with Mr. Shah, it became clear that he firmly believes that the diamond market has two distinct sides - naturals and synthetics. As a leader of the IDCA, he emphasized that it would be unseemly for him to engage with synthetics at all. Instead, he devotes his energy to fortifying the natural diamond market. Mr. Shah believes that a few simple changes can alleviate many of the concerns that both industry professionals and buyers have around this issue.

Firstly, since people fear purchasing a diamond whose origins are not as advertised, Mr. Shah wants a reliable blockchain ID system for all natural diamonds to be enacted as quickly as possible. People, he says, should be able to trace their diamond purchases back to their original mines. Not only would this give confidence to buyers that their stones are indeed natural, but the transparency would also promote ethical mining practices around the world.

Secondly, Mr. Shah advocates for the formal and complete separation of the markets for natural diamonds and lab-grown diamonds. To accomplish this, Mr. Shah stressed that natural and synthetic diamonds should not have any contact at all. That, he said, means they should not be sold at the same shows. 

The case for separate gem shows

This is an opinion that has rapidly growing popularity. In April, the AGTA announced a ban of any synthetic gemstone, diamond or otherwise, on their showroom floors beginning in 2025. In their announcement of this change, the AGTA said that the move is intended to bring "peace of mind" to attendees. Importantly, AGTA clarified that they don't care if dealers sell synthetic gems, they simply can't bring them to the shows. By making this point clear, the AGTA avoided passing any sort of judgment on the legitimacy of synthetics. This is a wise decision as synthetic gemstones are undoubtedly a permanent fixture in the gemstone world. 

When speaking with other natural diamond dealers at JCK, it became clear that many feel that they are having to play catch-up to deal with synthetic diamonds being around. Indeed, lab-grown diamonds have only become a significant part of the diamond market since about 2018. In the few years since, they claim an ever-growing proportion of the market as a whole. The pace of this expansion is nothing short of explosive.

A (natural) diamond is forever.

While details about how synthetic diamonds are sold are still being worked out, it is interesting that individual sellers from each side of the industry have adopted similar scripts when asked to describe their inventory. On the natural side, sellers emphasize the significance and permanence of gems. Taral Manoj Parekh, a sales representative for Crystal Cuts, offered that tried-and-true phrase - "a natural diamond is forever." He further spoke about the emotion behind a natural diamond purchase, saying that the greater financial investment is what gives jewelry the meaning that purchasers will value for years to come. Steve Boudeweel, a sales executive for Uniglo Diamonds, said "We pride ourselves in our authentic product."

Gajenda Bhikadia, director of Dharam Export, neatly divided buyers into two groups: those who want to spend less but get something pretty versus those who, in his words, "value the quality of naturals." Interestingly, Mr. Bhikadia observed that the proportion of people who fit into these categories differs between the American and European/Asian markets with Americans showing far more interest in affordable synthetics compared with individuals from abroad. However, Mr. Bhikadia noted that "American culture is about spending money." He predicts that this instinct will ultimately help draw people back to pricier natural stones. 

Are buyers are fleeing lab-grown diamonds?

Parag Sanghvi of Sejal Diamonds NY Inc. echoed Mr. Bhikadia sentiment, saying that he has already observed customers returning to natural diamonds: "Last year business was more affected by synthetics. This year people are coming back to naturals." Yogi Pansuriya, director of Aashu Diamonds Inc. also has noted a trend away from synthetic diamonds.

As for why some buyers are abandoning lab-grown stones, the natural diamond dealers all pointed to the same reasons - a lack of consistent valuation in real-time and a continued decrease in per-carat costs. While affordability was the key reason behind the meteoric rise in the popularity of synthetics, the rate of price decline, coupled with almost non-existent resale values, is causing people to feel like there isn't anything special about lab-grown diamonds. 

Unlike the natural diamond industry, there is no standardization of the synthetic market. I have personally found two identical diamonds from separate dealers that were priced with a $2,000 per carat difference. When buyers see this, they rightfully question the true value of stones. 

The market for lab-grown diamonds takes an unusual shape.

While natural diamond dealers face this issue with apparent apprehension, synthetic diamond sellers are not nearly as serious. Quite the contrary, the dealers I spoke with seemed enthusiastic, optimistic, and outright ambitious. 

Dhuv Narola and Krishna Narola, representatives of Ouros Jewels, excitedly shared that their company has recently taken two big steps towards expansion. Earlier this year, they started to produce synthetic diamond jewelry that includes synthetic-colored gemstones. Also, they are trying to distinguish themselves from other lab-diamond companies by creating unconventional shapes such as animal profiles and symbols. Mr. Narola said "Everyone does eternity bands. We want to do something different." Also, they are proud that their lab-grown diamonds come with IGI certificates so that their buyers can be certain of the quality of the gems.

Mark Pasdon, the distributor of the Marco Dal Maso line with The Gioielli Group, boasted about the synthetic diamonds that they use. He said that their gems are made using a combination of wind and solar energy. As a result, Mr. Pasdon was proud to say that the carbon footprint of these diamonds is minimal. This is something that his customers are very happy to hear.

Dealers seem to be on the same page - for now.

It is a hopeful sign that individuals in the diamond world, both those selling natural gems and those offering synthetics, appear to be on the same page: the markets for natural diamonds and lab-grown diamonds should be separated. Dealers selling both products are responding to their client's requests for transparency with regard to both stone origin and quality.

Further, there should be separate gem shows for each. For example, shows like JCK isolate sellers of natural diamonds from people offering synthetics on their showroom floors. 

However, it is the emotional response to the issue that is starkly divergent. It is upsetting is to see the distress of some natural diamond dealers. Yes, it is an indisputable fact that they are having to catch up to a marketplace that is unrecognizable from only a few years ago. Some like Mr. Shah are working hard to maintain the trust and loyalty of clients in the market for natural diamonds.

At the other end of the spectrum, synthetic diamond sellers feel comfortable with the growth of their businesses and are excitedly pursuing new ways to grow their creativity.

Hopefully, separating the markets for natural diamonds and lab-grown diamonds will give everyone room to breathe.