What about Lab Grown Diamonds?
Lab-Grown Diamonds (LGDs) are neither inherently good nor bad. However, there is considerable misinformation floating around about LGDs. On this page we provide an overview of LGDs, and explain why it’s important to understand the economics behind LGDs and be aware that their prices will continue to decline.
What are Lab-Grown Diamonds?
Unlike natural diamonds which are formed over millions of years deep beneath the earth’s surface, LGDs are “grown” in a lab using sophisticated technology. There are two ways to make LGDs:
- HPHT (High Pressure High Temperature) – this is an older method and uses a lot of energy.
- CVD (Chemical Vapor Deposition) – this method uses superheated carbon-rich gases that are ionized in order form the diamond in layers.
Often CVD diamonds are finished with an HPHT process. In all cases, LGDs are very energy intensive, so, contrary to popular belief, their carbon footprint can be very high. This is particularly true in areas where electricity is generated using fossil fuels.
Both methods can yield a diamond in a few weeks. The result is an actual diamond that is physically and chemically the same as a natural diamond. LGD technology is improving each year and we are already at a point where the 4 C’s of an LGD can be comparable to a high-quality natural diamond.
Note that LGDs are distinct from “simulated diamonds” such Moissanite and cubic zirconia; these are not diamonds at all, but are made to look like diamonds.
Distinguishing LGDs from Natural Diamonds
Natural and man-made diamonds have the same chemical properties, but they are not identical. The vastly different conditions under which they are formed leave differences at the atomic level which enables specialized equipment to tell them apart.
Specialized equipment to test for LGDs (based on the diamond’s fluorescence and phosphorescence, etc.) is becoming more prevalent and more accurate. In addition, diamonds of any significant size sold by reputable dealers include a laser inscription on the diamond girdle. One can always tell from the inscription whether the diamond is natural or man-made (though sometimes this may require a reference check of the inscription number with a lab).
A major implication of this detectability is that there is no “risk discount” for natural diamonds, i.e., given that we can always prove a diamond is natural, there is no risk that its value could be discounted because of uncertainty surrounding its provenance.
The technology factor and pricing
LGDs are highly dependent on evolving technology. Both manufacturing processes are benefiting from the relentless and substantial improvements in technology every year. This means that LGDs will become cheaper to produce every year. With competition and with an increasing supply, the retail prices of LGDs will also decline over time, as we have seen in the recent past.
The competition in LGD manufacturing will be intense because there will be many new non-jewelry uses for LGD, beyond the current industrial uses. The silicon used in microchips will eventually be replaced by LGD, and this will bring very large players into the field, who will deploy even more resources towards better technology – which, in turn, will lower prices further.
We do indeed see that LGD prices continue to come down. While there is much more variation in price in LGDs than in natural diamonds, on average they are selling below 25% of the price of a comparable natural diamond (i.e., more than 75% discount). In some cases, the discount is as high as 99%.
In contrast, many believe that the supply of natural diamonds will shrink in future because it will become harder and harder to extract natural diamonds from the earth.
Our view on LGDs in fine jewelry
Stittgen Fine Jewelry prides itself in creating and selling high-quality jewelry that will stand the test of time. Implicit in this promise is the understanding that our products will not be significantly devalued over time. More specifically, we will not sell the same product at a substantial discount in future. This is why we almost never have sales, whereas many other jewellers have “up to 80% off” sales regularly.
The primary concern with selling LGDs is that we would be selling something we know will retail for a lower price in a year or two. This does not align with our core values. We are not trying to make a judgement call or say that there’s something wrong with LGDs; we just feel it’s very important that our clients understand the true “value” of their lab grown diamond, and that it will retail for less, not more, in future. It is also important to note that the vast majority of LGDs have no resale value.
Our clients are purchasing or commissioning pieces that will have meaning, not just for them but also for those that the piece will be passed on to. A Stittgen piece is treasured for a long time. Often a significant investment is made, with the understanding that even though the price of gold and natural diamonds fluctuates, they are intrinsically “precious” and will always be. This is particularly important for jewelry to commemorate life events such as engagements and major anniversaries.
On the other hand, our objective is only to educate and provide the best advice we can. If a client, after considering the foregoing, is still convinced that LGDs are more appropriate for them at this juncture, then we can easily source suitable LGDs for them. We have done exactly that for a young couple that has always wanted a Stittgen ring, but due to short-term budget constraints, wanted an LGD until they could buy a “permanent” natural diamond.
At Stittgen, our mission is to create treasured pieces of enduring beauty and quality that have meaning for you. We are here to facilitate turning your vision into reality.