India is an aspirational country, and as we improve our per capita income, I believe the demand for Lab-Grown Diamonds (LGD) will increase. However, from my observations, especially having four females in my household, it is challenging to convince them to choose LGD. For them Wearing a Natural Diamond serves more as a confidence booster than anything else.
Moreover, LGDs, similar to natural diamonds, should not be viewed as investment opportunities, as resale values typically return only about 10% of the original purchase price for LGDs, compared to 40-50% for natural diamonds.
With recent prices for LGDs dropping as low as 15000-20000, they might start being perceived as an alternative to artificial jewelry rather than a treasured possession. In contrast, gold continues to be the number one choice for aspirational jewelry, as it also offers a better return on investment, especially during these uncertain times with our depreciating currency. Regardless of opinions, gold will always remain the top choice, which is why its prices keep reaching new highs every few months.
If the price of LGDs continues to decline, they may become more affordable, but they will lose their aspirational value. This can be compared to the popularity of the iPhone in India—it’s sought after primarily because it is aspirational. Even though its more expensive than most phones, it still sells more than most top-tier Android phones, Reason - Aspirational.
Moreover, more than 80% of iPhones are sold on EMI (Equated Monthly Installments), illustrating that when a product is aspirational, people are willing to take loans to purchase it. This trend applies to luxury cars, SUVs, luxury bags, and watches as well.
For example, if you buy a Hermès bag or a Rolex/Patek Philippe watch, you might use it for a couple of years and even then sell it for a 30-50% appreciation, depending on the model and its demand.
In my view, if LGDs become too affordable in the future, there may come a point where people won’t bother with certification and will treat them as mere artificial accessories.
Disclaimer: No buy/sell recommendation; I have already exited around the 580 levels, just tracking as I am invested in other scripts in the jewelry sector.