Prices for rough diamonds have dipped in 2023 as many post-pandemic consumers shy away from luxury goods.

According to the Zimnisky Global Rough Diamond Index, prices are the lowest they've been in a year. Industry analysts attribute the slump to declining sales at the jewelry counter.

As consumers spent less money on dining and travel during the pandemic, "people had excess money to spend on discretionary purchases," noted Paul Zimnisky, a global diamond analyst.

Diamond prices have adjusted to consumers choosing services over jewelry. People are eating out, traveling and spending money on experiences rather than luxury goods, according to analysts.

"Diamonds are a completely consumer-driven market," said Edahn Golan, an independent diamond analyst. Shopper demand for diamond jewelry influences rough diamond prices and, to an extent, retail prices. Retailers stoke consumer demand by pouring hundreds of millions of dollars into advertising.

The plummeting prices follow two record-breaking years in rough diamond sales. In 2021 and 2022, demand for natural diamond jewelry was at an all-time high.

"There was a parabolic move up, and now there's a correction on the other side," Zimnisky noted.

But a drop in rough diamond prices does not mean shoppers will see cheaper price tags in stores.

Retailers typically do not adjust their in-store prices based on the rough diamond market in the short term, regardless of whether the products become cheaper or more expensive on the back end. According to Golan, "retailers set a price point, and they're fiercely protective of their gross margins."

Even though rough diamond prices are falling, buying a one-carat round diamond at the store is on average 3% more expensive now than it was in January 2020, he said.

"In the short term, if wholesale prices fall, some jewelers are going to try to use the opportunity to capture more margin," said Zimnisky.

Industry analysts expect to see a jump in retail sales during the winter holidays and into early 2024. The winter months are peak engagement season, and Christmas and Valentine's Day are typically lucrative holidays for jewelry companies.

While this might lead to a small spike in rough diamond prices, "overall, we're going to see a year-over-year decline of sales in the holiday season," predicts David Johnson, a spokesperson for De Beers, one of the largest diamond companies in the world.

Zimnisky also foresees a softening of the market this year compared to the 2021 and 2022 peaks, but says the economic indicators in the United States are promising. "The stock market is performing relatively well and employment is strong," he said, paving the way for a gradual recovery of rough diamond prices in 2024.