There aren’t many things in this world that can hold value as well as gold and diamonds do. Diamonds, after all, are forever, but gold seems to be holding its own in the fight.
But with all that said, have you ever wondered – is diamond rarer than gold? The prices would suggest it, but the truth might be a bit more complicated.
Who determines these values, and does it matter how rare one of these materials is? There are many questions here, and we plan on giving you all the answers you need!
The research is done, and we have some interesting findings. Before we start, let’s get something straight:
Both of these are excellent and stable investments. The only reason we ask the question is to see if rarity correlates to the price.
It can be a confusing topic – but we’re here to clear a few things up!
Is Diamond Rarer Than Gold?
So, how about we get this thing going? Let’s start with the straight answer:
NO, diamonds are not rarer than gold. On the contrary, they are anything but rare. On the other hand, while not the most scarce material in the world, gold is not popping up under every stone that we turn.
There’s a good reason for this that we’ll explain in a bit more detail later on; the gist of it is pretty simple, though:
Diamonds are made of Carbon, and gold is made out of, well, gold. Now, Carbon is one of the most common elements in the world. So, you can imagine how an object that only has it as an ingredient can’t be considered a rarity.
So, what about gold?
Well, gold is a metal – and while it’s not an uncommon one, it is pretty hard to find. But that’s not the only thing that matters when it comes to the price.
See, many factors get included in the pricing of both of these materials.
Firstly, diamonds are very common, but as a kind of raw material. It’s fairly easy to find smaller diamonds that are colored and spotted. The pure white diamonds that get the high grades on the scale are a more challenging find.
If we’re being honest, there is no difference between lab-made diamonds and the ones we can find in mines.
But, you would need a lot of heavy-duty equipment to make pure diamonds that are also large at scale. Not only that, diamonds need to get cut to be sold at the highest price.
Sure, you can sell them for industrial purposes, but you’d be stealing from your pocket if you had a diamond that has the potential to be cleaned up and cut by a professional.
So, in a sense, we could say that pure high-grade, high-carat diamonds are rarer than gold. Well, we could – but we won’t.
Even with that said, they’re still all over the place. So much so that it would be crazy claiming that they’re rare in any sort of scenario!
Read Also: Will Diamonds Ever Run Out?
Why Is Gold Rarer?
Remember how we said that gold is pretty hard to find? Well, we weren’t kidding. It’s so rare that if we were to take all of the gold that was ever found on our planet and melt it up into one giant cube, the diameters would be a square with 60-foot sides.
Now, we know what you’re thinking – that’s impossible! You’ve probably seen all the heist films and heard the stories of vaults all around the world filled with golden bricks and jewelry. But here’s the thing, to even make a brick of gold, you need to add other metals.
The reason for this is the fact that gold is just too soft and it can’t get molded into a solid brick without deforming as time goes by. Because of this, other metals are added so it will keep its shape. Now, the best example isn’t the best option, as gold and plates usually tend to have more gold in them. The whole point of molding gold into a brick after all is for it to be transferred easier.
Golden jewelry is probably the most common place you’ll find other metals. Let’s face it, we need a piece of jewelry to keep its form over time if we want it to retain its value. Now, let’s get something straight – pure gold won’t just melt away if there are no other metals present. But it will be susceptible to deformations.
This is quite a difference that it and diamonds have, as the latter is the hardest material on the planet. This doesn’t affect the difference in the price, but we taught it to be a fun fact. But what is it then about diamonds that makes them so valuable?
How is it possible that there’s so much less gold in the world, and yet it’s worth considerably less than the diamonds? Well, it’s all about reputation and marketing. Diamonds bring quite a bit of fame to the table. And it’s not that gold hasn’t built a valuable name for itself, but the shiny gems just seem to take it to a whole new level!
Learn More: Why Is Gold Cheaper Than Diamond?
How Come Diamonds Are Worth More?
Alright, so we’ve covered the bars and the golden jewelry, but we have yet to answer the question – why are diamonds so expensive? The answer may come as a bit of a surprise to some. See, it’s all about the demand, and as long as it’s high, the value will keep up.
But you might have caught something in the article – diamonds aren’t rare. So what makes them so special? Heck, gemstones like Rubies are much harder to find than colorless diamonds, and yet they pale in comparison when it comes to value. So what’s the deal?
Well, it’s a matter of good marketing, as we have already mentioned. Diamonds weren’t always a crucial part of a marriage proposal, far from it. The proposal that we are used to today is miles away from any kind of tradition. But, a great marketing campaign can do wonders for a culture!
Back in the 1800s, the value of a diamond equaled that of any other gemstone. They were profitable, but there sure was room for improvement. So the company that had the most to gain, well, improved on the market. In their favor that is. Back then they were the only company to mine for the shiny rocks, so you can imagine how lucrative it would have been to control the market.
And that they did, and for a while too! They started running campaigns all over the US, and it didn’t take them long to spread overseas. In no time, the diamond became the most important part of the outfit, if you could afford it that is. The value of diamonds started to skyrocket, which was a simple task since the rocks were valued by the employees of the company.
The complaint that we keep mentioning is the DeBeers Company, and if that name sounds familiar, it’s because they’re still going strong today! They don’t control the whole market anymore, but they do still run a good fifth of it, which earns them more than enough bragging rights.
So you see, it doesn’t matter that diamonds are easy to find. The companies that mine them can just make an artificial shortage by locking up the storage for a while. Which is exactly what they do. This creates the need for more mining since the demand pretty much never goes down thanks to a century-long ad campaign.
Who Decides That Gold Is Worth Less Than Diamonds?
So if diamonds are so overpriced, does that mean that gold should be worth more? Well, that’s a good question, but we have to clear a few things up. We can’t agree that diamonds are overpriced, because it’s an argument that can be used for anything when you think about it.
The diamond industry is a strange one, we’ll give you that. But the prices that are set are still dependent on factors that don’t make every single piece of diamond a bulletproof investment. See, diamonds need to be graded before they’re priced. Only the best diamonds get the high grade, and with it, high prices are on the market.
The grade of the diamonds depends on four things – cut, clarity, carat weight, and color. These are the four Cs, and this grading system is an obstacle that gold doesn’t have to jump over in order to be priced well. Every part of that system is connected to the one before and the one after.
The color of the diamond affects the clarity. The cut can affect the weight which in turn affects the price completely. Let’s say, for instance, that you have a rough diamond that’s near-colorless, included heavily in certain spots. The situation gives you two options. Cut the diamond in a way that gets rid of the inclusions, and by doing so get rid of a lot of carats.
Or, make sure that you have a hefty diamond that happens to be included and spotted. A smaller diamond with high color and clarity grades may even bring in more profit than a much larger included one. But the trick is that it needs to get cut by a professional. And trust us, people notice a novice cut when they see one.
Gold, on the other hand, doesn’t have to pass all these tests. But even if you do have pure 24 karat gold, you still depend on the LBMA’s gold fix. What do those words mean you ask? Let us explain.
Learn More: Are Diamonds Worth More Than Gold?
How Is Gold Priced?
It’s not the easiest task, finding a diamond and shaping it into something that will bring in the most profit. Sure, it may seem as if you have all the right cards, but it doesn’t mean that you have a winning hand if you don’t know how to play it. Gold, on the other hand, exists in a simpler marketplace.
The first gold rush happened back in 1697 and during this period, the first shipping of the stuff arrived in Lonon from Brazil. Because of the sheer power of the British monarchy in that period (and pretty much all the period after it0, London became the most important place for gold in the world. Even today, gold is priced in the city, and all other countries look to suit for guidance!
In the modern-day, the LBMA (London Bullion Market Association), does research on a daily basis, and it tells the rest of the world how much gold is worth for that day. This is sometimes called the London Gold Fix. Now, we mentioned the modern-day, so you won’t be catching the Fix on the radio or in the newspaper.
About 6 years ago (2015) the ICE Benchmark Administration took charge and replaced the old process with a new, electronic auction system called the LBMA Gold Price. We prefer the old name, but hey, it’s not up to us and it does the job we guess.
So what exactly is the process of determining the price of gold?
Well, IBA has an algorithm that monitors auctions all around the world and has an update every 45 seconds. They take these updates and compare them to things like the inflation of certain currencies, the political situation in the countries where the gold is doing best or worst, and other things like the state of the devaluation of all types of currencies.
With all this information they release London Gold Price twice a day – 10:30 AM and 3:00 PM, UK time. This in turn affects the price of gold all over the world. With this, it’s obvious that gold obeys the laws of supply and demand. If the supply is low, there will be more demand. It’s not a rule of thumb, but it’s what happened in most cases.
The London Gold Price is released in US Dollars. It’s generally a safe bet, and investors often buy gold in order to go around the inflation and devaluation of their countries currency. Both diamonds and gold will work perfectly for this purpose though, as they both maintain their value quite well over the years. But gold is generally seen as the safest choice.
Learn More: Who Controls The Price Of Diamonds?
So are diamonds rarer than gold? Absolutely not. Does that affect their value? Absolutely not!
These gems seem to be a safe bet no matter what the financial climate seems to look like worldwide. Gold is harder to find, sure, but the prices are where the story is at. And boy, diamonds just don’t seem to care how rare or common they are, and buyers don’t care one bit!
What the market wants it gets we suppose!