Diamond prices have crashed, signalling the arrival of deflation. Prices have dropped to levels not seen since the early days of Covid when stimulus checks were distributed. The decline in prices reflects a broader luxury spending bust that also affects high-end watches like Rolex.

Diamond Price Index

The Rise and Fall of Diamond Prices

During the pandemic, diamonds, watches, and jewellery saw a surge in demand, peaking in the first half of 2022. We previously explored the rise and fall of Rolex watches and now shift our focus to precious stones.

The Index, tracked by the International Diamond Exchange (IDEX), rose from 116 in March 2020 to 158 in March 2022, a 36% increase. However, prices have since plummeted by 24%, returning to levels comparable to late summer 2020. For instance, a 1-carat natural diamond that sold for $6,700 a year ago now fetches around $5,300, as stated by Paul Zimnisky, CEO of Paul Zimnisky Diamond Analytics, in an interview with CNBC.


Factors Contributing to Diamond Deflation

The decline in diamond prices can be attributed to several factors. One significant reason is the diminished impact of government stimulus checks on consumer spending. As stimulus programs ended and time passed, consumers no longer have the same disposable income, impacting their purchasing power. Additionally, negative real wage growth over the past two years reduced personal savings, and mounting credit card debt with high-interest rates have all taken a toll on luxury spending.

Deutsche Bank analysts recently alerted clients about the emerging luxury spending bust in the United States, stating, “Slowing to negative growth year-on-year in the US is a building concern, especially given signs of softening demand from more economically sensitive aspirational consumers.” These signs of weakening demand and consumer retreat may be early indicators of an impending economic downturn, potentially occurring later this year or in the first half of 2024.



The crash in diamond prices and the overall decline in luxury spending paints a grim picture for the high-end market. Deflation reflects changing economic conditions and consumer behaviour. With the conclusion of stimulus programs, negative wage growth, diminished personal savings, and increasing credit card debt, consumers are scaling back on luxury purchases. These developments serve as early warnings of a possible economic downturn that could have broader implications beyond the luxury market.



What is diamond deflation?

Diamond deflation refers to the decline in prices, indicating a downward trend in the market.

Why have diamond prices crashed?

Prices have crashed due to the end of government stimulus programs, negative wage growth, reduced personal savings, and mounting credit card debt.

What impact does diamond deflation have on the luxury market?

Deflation is part of a broader luxury spending bust that affects various sectors, including high-end watches like Rolex.

When did diamond prices peak?

Diamond prices peaked during the first half of 2022 but have since experienced a significant decline.

Are there indications of an economic downturn?

Signs of weakening demand and consumer retreat suggest the possibility of an economic downturn that could materialize later this year or in the first half of 2024.

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