Diamond Price Forecast: Supply Cuts vs. Permanent Demand Loss

Rough diamond valuations have fallen roughly 37% between 2024 and the first half of 2026, a decline severe enough to challenge one of the oldest assumptions in luxury: that diamonds always hold their worth.

That assumption is now being tested by two forces pulling in opposite directions.

On one side, the world’s largest miners are throttling supply aggressively, cutting production to multi-decade lows in an attempt to defend pricing. On the other, structural headwinds across global consumer markets are eroding demand faster than supply discipline can compensate.

This is what makes any credible diamond price forecast so difficult right now. Supply cuts that would normally lift prices are colliding with demand destruction that may be permanent rather than cyclical.

The analysis that follows offers a framework for separating the two: whether current valuations represent a temporary dip that historical recovery models can predict, or a structural reset that renders those models obsolete. Getting that distinction right is the difference between positioning for a rebound and catching a falling knife.

Evaluating the structural demand deficit

The first thing to understand about this downturn is that it does not behave like the corrections of 2008, 2015, or 2019. Those were cyclical. This one carries a structural weight that supply discipline alone cannot lift.

Two forces are suppressing demand at the same time, and neither is temporary.

The first is substitution. Lab-grown diamonds, chemically identical to mined stones, have detached the consumer’s willingness to pay a premium for natural gems. According to industry pricing data, the average lab-grown discount to natural diamonds widened from 26.6% in 2019 to 88.1% by July 2026. That is not a discount a consumer overlooks.

The economics behind that gap are what make it permanent. Lab-grown retail margins sit at 80-90%, compared to 30-40% for natural diamonds. Synthetic retailers can keep cutting prices and still book healthy profits, which means the downward pressure on natural stones has room to run for years.

The lab-grown diamond economics driving this shift are more durable than a typical competitive disruption: manufactured supply has no geological ceiling, so the price compression is self-reinforcing as producers continue to expand capacity and chase market share at margins that natural stone retailers cannot match.

Because lab-grown supply is manufactured rather than geologically constrained, it imposes a structural price ceiling on gem-quality natural stones. Mining supply cuts can tighten volumes. They cannot make a natural one-carat gem compete with a chemically identical stone selling at a fraction of the price.

The read for your portfolio is uncomfortable but clear. If lab-grown stones represent a permanent technology shift rather than a passing fashion, then the historical pricing floors that underpinned every past recovery no longer apply to gem-quality natural diamonds.

The Chinese macroeconomic headwind

The second suppressing force is geographic, and it has hollowed out a pillar of global demand.

China’s natural diamond market shrank 57%, falling from RMB 100 billion in 2021 to RMB 43 billion in 2024. Over the same window, diamonds’ share of overall jewellery sales in the country dropped from 14% to 6%.

This reflects broader caution among Chinese consumers rather than a specific aversion to diamonds. As sales slowed, retailers aggressively offloaded polished inventories, an unwinding estimated to have cut cumulative demand by around 40% across two years.

There are early signs of a floor. H1 2025 jewellery sales rose 11% year-on-year and polished diamond imports jumped 43.5%, hinting at a U-shaped recovery. But the recovery is highly gradual and entirely dependent on inventory clearance and macroeconomic stabilisation, which tells you not to mistake a bounce for a return to the old normal.

Gen Z demand patterns in the US market compound the China problem by introducing a second geography where structural, not cyclical, shifts are suppressing natural diamond consumption; younger buyers have shown materially lower attachment to the provenance premium that historically justified natural stone pricing.

Tracking the midstream margin collapse

To understand where diamond prices go next, you have to follow the stone from the mine to the retail counter and find the point where the pain concentrates. That point sits in India.

India is the dominant global hub for cutting and polishing rough diamonds, the vital midstream link between miners who dig the stones up and the retailers who sell them. When this sector strains, the whole chain feels it.

Right now it is caught in a vice. Rough diamond prices have been held artificially high by miners defending their books, while polished output sells into heavily discounted retail markets. Polished diamond prices fell 17% in FY2024 and a further 7% in FY2025, reaching all-time lows.

That squeeze crushed profitability. Operating margins for cut-and-polished diamond players dropped by roughly 400 basis points to hover around 4%.

The pressure is set to intensify. US tariff hikes on Indian diamond jewellery are projected to compress those margins further to 3.5-4%, tightening liquidity across the sector.

Here is the mechanism that matters for investors. Miners sell rough stones regardless of midstream appetite, so when Indian processors run out of financial room, they stop buying. That refusal travels straight back upstream and forces miners to cut sales volumes and prices.

The clearest signal of that stress is when the midstream collectively refuses to buy at all.

When Indian trade bodies formally called for a two-month moratorium on rough imports, it marked the ultimate distress signal from the midstream: processors declaring they would rather halt purchasing entirely than keep absorbing losses on stones they cannot profitably polish.

Watching Indian midstream behaviour gives you a leading indicator that moves before official price indices update. Purchasing is not expected to normalise until US demand, Chinese demand, tariffs, and lab-grown dynamics stabilise enough to lift processing margins back toward 4-5%.

The geopolitical paradox of Russian sanctions

Everything so far has been economics you can measure. The supply side introduces something murkier: geopolitics that has quietly corrupted the very pricing data investors rely on.

Alrosa, the Russian miner accounting for over 90% of Russian production and roughly 30% of the global market, sits at the centre of it. Western sanctions redirected its stones away from Western buyers, and the physical effect was straightforward. Supply to Western markets tightened.

The scale of the supply throttling across the industry is significant. Alrosa cut output 10% in 2025 to 29.8 million carats, and plans a further 13-16% reduction in 2026, targeting 25-26 million carats. As a direct consequence of sanctions, the company held 129.9 billion rubles (approximately $1.3 billion) in unsold inventory at the end of 2024.

Alrosa’s inventory position is further complicated by export duties layered on top of the sanctions regime, creating a cost structure that makes it difficult for the company to clear its overhang even through non-Western channels where it now directs the bulk of its sales.

De Beers has matched the discipline, operating up to 35% below production capacity to manage the overhang. On paper, this is the supply restraint that should rescue prices.

The transparency deficit

The paradox is that the same sanctions destroying supply also destroyed the market’s ability to see itself clearly.

Russian stones did not disappear. They diverted to non-Western channels, creating a shadow market that transacts outside the visibility of Western traders and analysts. Physical volumes tightened in the West, but a large slice of global supply now clears at prices nobody in Western markets can observe.

That bifurcation degrades the reliability of established benchmarks like the Zimnisky Global Rough Diamond Price Index. When roughly a third of global production trades in the dark, the published index no longer reflects the true global clearing price.

For investors, the implication is direct. You need to price in a higher risk premium for diamond assets, because the indices you would normally trust to gauge fair value are now working with incomplete data. A benchmark that cannot see a third of the market is a benchmark to treat with caution.

Reading the De Beers sights as a leading indicator

Enough of the backward-looking pain. The more useful question is where the first verifiable sign of a market pivot will actually appear, and there is a specific place to look.

The De Beers sights are the answer. Ten times a year, De Beers sells rough diamonds to a curated list of approved buyers, or sightholders, and whether those buyers accept, defer, or negotiate their allocations offers an early read on midstream sentiment before it shows up anywhere else.

In early 2026, De Beers made structural changes that reveal how far it has moved to meet market reality:

• A 10-15% price reduction on rough diamonds larger than 0.75 carats at the January 2026 sight.
• The removal of approximately 25 elite buyers from the sightholder list.
• A shift to “one-line invoicing”, providing a single total rather than itemised box prices.
• The shortening of the April and September 2026 sights to four days instead of five.

These are the moves of a company aligning its prices with a secondary market that had drifted well below its official list. Before the January cuts, De Beers rough prices sat 5-50% above secondary-market levels depending on category.

History offers a template for what a bottom looks like. In late 2019, as the previous cycle turned, De Beers increased allocations to $390 million at its November sight even while cutting prices by 5% or more. Buyers took the stones despite lower prices, and that combination signalled returning confidence and marked the market floor.

That gives you a concrete trigger to monitor. When sight prices stabilise and elite buyers consistently accept their full allocations without deferrals, the cycle has likely bottomed, and that is the moment worth watching for capital deployment rather than any headline price index.

For readers wanting to understand the corporate context behind these strategic moves, our dedicated guide to the De Beers ownership transition covers what a change in ownership could mean for the company’s pricing philosophy and sightholder relationships in 2026 and beyond.

Mapping the investment thesis for a market reset

The central conflict of this market is now clear. Upstream, miners are exercising genuine supply discipline, cutting production to levels not seen in decades. Downstream, demand is being eroded by two forces, lab-grown substitution and a structurally weaker Chinese luxury market, that no amount of supply restraint can fully offset.

Past cycles eventually re-priced the market when deep supply corrections met a macroeconomic recovery. The difference this time is that a genuine recovery requires two things to resolve at once: the clearing of bloated retail inventories and a return of macroeconomic confidence, layered on top of a permanent technology shift that did not exist in prior downturns.

That combination makes broad-based price restoration unlikely. The more probable outcome is selectivity, where rare stones and niche segments hold or recover value while the wider gem market remains capped by synthetic competition.

For investors, the takeaway is one of discipline over optimism. Watch the Indian midstream, watch the De Beers sights, and treat published indices with scepticism given the sanctions-driven transparency gap. Broad exposure to natural diamonds carries structural risk that a supply-led rebound cannot cure.

This article is for informational purposes only and should not be considered financial advice. Investors should conduct their own research and consult with financial professionals before making investment decisions.

Past performance does not guarantee future results. Financial projections are subject to market conditions and various risk factors, and forward-looking statements are speculative and subject to change based on market developments.