Getting Real – Should you buy Lab Grown?

Dear Reader: I am asked “What are your thoughts?” regarding Lab Grown (CVD) diamonds as much as anyone. With 16 years in diamond cutting offices and a deserved reputation for being very vigilant with my own pennies (despite a “vicious jewelry habit”) I think I share your perspective on the important issues.

But how to write this article when the readership is bound to be diverse?
The following are my loosely transcribed answers from real conversations around lab-created (CVD) diamonds.

Dear Lab-Created (CVD) Diamond Company (through your headhunter): Yes, I would love to have a leadership salary, benefits, and the runway to actually deploy my hard earned network and media savvy to make a market. To be a home run queen on your behalf. That’s just a big ol’ softball… in the short term. But here is the thing. I see China (I don’t see France) and I don’t like getting kicked in the under-pants. China, together with India…. I know how they “do”. And that is wait for the “first mover” companies to grind out the work and create a market for your hot-house beauties, only to jump in on a non-protectable process with cheap labor production. And there is NO LIMIT to the number of facilities that can be created for these stones. So here’s the problem. As soon as I, or anyone else, show real traction in the marketplace for you, everyone is going to jump in with their own production to try and make good while the sun shines. They will undercut prices on these stones like crazy because that’s what countries with cheap labor do when we have (relatively speaking) NO BARRIERS TO ENTRY and no sustainable advantage. The price of the product is going to spiral downward inversely to increases in production and competition.

Dear Diamond Company Principal: Do not fret. Stick with your gut and your belief in the naturally mined gemstone market. It worked its way through synthetic rubies, sapphires and emeralds and the market for those rare naturally mined counterparts is strong. It will shake out fine with diamonds. Keep your faith in GIA and the precedent that the colored gemstone market gives you.. All that money you’ve paid GIA over the years for those certificates for every diamond you’ve sent them? They should have your back on this lab grown thing. They spent the money. They have the technology.

Now, a little history about visually identical gemstones and the marketplace. I didn’t get to do a Laboratory tour at GIA all those years ago when I was earning my Graduate Gemologist diploma. But I do remember being required to identify and distinguish lab grown rubies and sapphires from the natural mined stones. To my eye they were identical. I was allowed to use the microscope…maximum power. And it was still frustratingly hard to see those tiny and faint growth patterns that marked the difference. So it’s a fair comparison to make with Diamonds that, with a little lab equipment, the distinctions can be made, even if you can’t see it with the naked eye, or in my case even with a Microscope most of the time.. My assurance to you is that 100 years after the first successfully “created” colored gemstones, they are not interchangeable in the marketplace because these faint distinctions do still count….. and the difference in value remains vast. For confirmations, start tracking auctions at Christies, Sotheby’s and Phillips, Bonham’s and the like.

Dear Esteemed Retail Jeweler: Having given the above thoughts to the Lab Grown Diamond Companies and the Natural Mined Diamond Companies, here is my advice to you. I personally can’t recommend the lab grown diamond to a client if you want a long term relationship.. I realize margin might be better on CVD. The price competition is less aggravating. I understand your dilemma. You’re a full range retail jewelry store, not a natural diamond atelier. Do what you have to do. However, for the sake of the relationship make full disclosure to your clients. Protect them from an unexpected bad experience. I recommend my explanation as follows:

Dear Potential CVD Diamond Customer: You may consider a CVD diamond as it may currently be significantly less expensive than the GIA graded naturally mined diamond. They are chemically the same. The material is optically the same. The durability is the same. They are essentially the same. The difference is that GIA has the money and the will to detect the one distinction – the growth process — and report on it for each diamond whether it is naturally mined or created in a lab. That distinction will stay with your diamond forever. Just like with investment rubies, emeralds and sapphires. As long as you never plan to sell this diamond and your children never plan to sell this diamond, and their children and so on, then you will never experience a downside to your savings with a Lab Created diamond. To be 100% clear. If you have a financial emergency and you take this $7000 or $14,000 lab grown diamond to sell it for emergency purposes you may not be able to sell it. At all. Not even for $200. There is no secondary market for lab grown diamonds as exists for mined diamonds. And it may never develop.

Dear Jewelry Designer and “Friend of Leo”: Be careful. We had a window of coolness where you too could be a “Friend of Leo” on that website built by “Friends of Leo” and I know it may have seemed cool, because the Diamond industry has yet to bounce back and support designers like it needs to. But let’s not shoot ourselves in the foot and sell a $6,000 ring that might as well have a lump of coal in the center should your design hit the secondary market. Your design with a stone that no one wants to pay for because you built a mounting for an expensive stone and now that mounting is 10 times the cost of the stone. A tough sell and a potential embarrassment.

That’s it, fine jewelry friends ….. In a nutshell, there is no bottom to how low the price of CVC diamonds can go as there is potentially an unlimited supply of these “created” diamonds, so the future value is dubious. And, as there is no secondary market or history of price stability for created diamonds as there is with naturally mined diamonds, it’s very difficult to find a buyer right now at any price for a lab created diamond that you don’t want anymore. Plenty of people to sell you one. No one willing to buy it from you. Proceed accordingly.