Diamond Crash in 1980

The diamond price has been the most stable price for any good in the last 100 years. With one single exception: The diamond rush of 1979. The diamond price is regulated by the diamond syndicate and is therefore very stable. Only in 1979 the diamond syndicate lost its control over the market.

At this time many investment consultants advised their customers to invest in diamonds. Especially Japanese banks took diamonds as security for loans. As consequence the demand in diamonds increased fast. The diamond syndicate couldn’t contain the price in a certain price range with additional diamond sales. The price for one carat D diamonds increased by almost 1000% to 60.000 US Dollar per carat.

Finally Japanese banks didn’t accept diamonds as loan security any longer and they sold the diamonds on the market. As a consequence the market was sated and the price dropped to the value it was before the diamond rush (approx. 6,000 US dollars per carat).