Many men in the United States can attest to the difficulties and expense of meeting society’s expectation that they give an engagement ring for their future spouses. This duty only exists because it was created by the entity that stands to benefit from it. American couples exchange diamond engagement rings as a result of a decision taken by De Beers in 1938. Prior to a tremendously successful marketing campaign in 1938, Americans only exchanged engagement rings on rare occasions.
The yearning for diamonds is a marketing tactic, but diamonds aren’t particularly rare in the first place. Only by restricting the number of diamonds available for sale has De Beers been able to maintain diamond prices high. Thanks to advertising gurus, diamonds have been presented to us as forever priceless and worth every penny we save. Are diamonds, on the other hand, the best investment you can make? Is it true that diamonds have no expiration date? The diamond ring is really valuable in my opinion. According to experts, any diamond weighing more than two or three carats is considered “big.”
Isn’t it self-evident that a bigger diamond is more valuable? Sorry, but that isn’t the case. Simply put, diamonds aren’t worth as much as you would think, and here’s why. In finance, the term “intrinsic value” is employed. An asset’s value is determined by the (discounted) value of its future cash flow. The “terminal value” of a car acquired by Hertz, for example, is the profit made by the corporation by renting and subsequently selling the vehicle. Hertz considers automobiles to be an investment.
Unless you gain money from it in some other manner, the value of an automobile is determined by its resale value when you buy it. The value you lose as a result of owning and maintaining a vehicle is a very real cost. Gold and silver may be bought and sold on financial exchanges. Inflation has no effect on their value. Gold coins and bullion may be acquired and stored beneath your mattress (at a 10% premium to market pricing). However, because gold jewellery has a 100-400% retail markup, it is generally not a suitable investment if you wish to store it. Diamonds are depreciating assets masquerading as investments.
Because of the prevalent assumption that jewellery and precious metals may rise in value and store money, they are frequently thought of as inflation-hedging investments. This isn’t altogether incorrect. On the other hand, diamonds dissolve at a far faster pace than most other rocks. Furthermore, a former executive of De Beers, a prominent diamond-selling company, claims that diamonds have no inherent value. There’s also the fact that diamond mining is a hazardous and ecologically damaging practice that causes more harm to the diamonds than benefit.
Even if you save your hard-earned money in the hopes of generating a profit from this expensive stone, the truth is that the diamond you buy will lose at least half of its value the moment it leaves the jeweller’s shop. Marketers and advertisers utilise urgency and FOMO to sell to us, and this is exactly what they did with diamonds. Despite the fact that diamond sales were at an all-time low during the Great Depression, these entrepreneurs wanted to make a profit. As a result, N. W. Ayer & Son was hired as an advertising company, and the catchphrase “A Diamond Is Forever” was coined. In 1938, everyone who heard it believed it.
We’ve put our confidence in this agency’s innovative ingenuity all over the world. That is, until now. What about the worth of a diamond after you’ve purchased it? This has to do with the claimed shortage of diamonds. It’s all a deception to get us to buy diamonds from these companies because they claim to be rare. Diamonds are rather frequent. The marketing plan worked because it made diamonds a universally desired item. As a result, many men in the United States felt compelled to propose a diamond engagement ring.
The diamond was shown as expensive and difficult to obtain. All of this, however, has been done to the benefit of companies, who stand to profit handsomely from the public’s gullibility. Not only are diamonds plentiful, but we are also overpaying for them. Diamond creation is, indeed, a labour-intensive process. The markup, on the other hand, is still absurd. “Profit margins are so great [at high-end jewelers] that the price you pay is a sham,” says Vincent Taylor, a long-time jeweller. Although Taylor is established in the United Kingdom, similar markups may be found in the United States. The Atlantic claims that a diamond’s markup and its setting can run from 100 to 200 per cent.
The huge markups on diamonds, which range from 253 per cent at Tiffany & Co. to 336 per cent at Harry Winston, were uncovered by YouTuber Jason in a video that was taken down from the site and reported on by Uproxx. Many of our customers would agree with us. Because her husband had an affair, she divorced him and attempted to recoup some of the money she had spent on her engagement ring. Despite the fact that it was originally valued at £1,000 (about $1,225 USD), she was finally paid £50 (around $70) by jewellers. She sent a copy of the diamond’s authenticity certificate to The Guardian to back up her claim. Yikes! This is, of course, the case in the United States. Personal financial guru David Bakke expected a somewhat higher return for The Cheat Sheet, but only 60% of your money was repaid.
Despite their toughness, diamonds are susceptible to discolouration, chipping, and even breakage. Naturally, none of that would appear in the advertisement. In less than a year, De Beers, the world’s most powerful diamond cartel at the time, adopted the tagline “A Diamond Is Forever.” That was all a part of an effort to persuade Americans to buy diamonds instead of other jewellery. Although diamonds have a limited supply, companies like De Beers want you to believe differently, so they deliberately limit the quantity of diamonds on the market. Due to a scarcity of supply and great demand, diamonds will inevitably become more expensive.
Diamonds are a good example of depreciating assets that aren’t actually investments. To the public’s dismay, jewellery does not appreciate in value over time, contrary to popular belief. Because gold and silver are the only commodities that appreciate and maintain their value, they may be purchased on any financial market. Diamonds are one of the most often mined gemstones, according to the International Gem Society. As a result, the myth that diamonds are highly rare is false. On the other side, marketing and diamond companies rely on a technicality: that all gem-quality stones/materials are rare since they are naturally occurring materials infinite quantities in the earth’s crust/core. Even though some argue that the high price tag is due to the difficult mining and processing operations, the markup price for diamonds is exorbitant.