Valentine’s Day is here and you might find yourself buying (or wishing you had remembered to buy) a Valentine’s Day present. A classic romantic present involves gold, diamonds, and sometimes both. And both diamonds and gold seem at first blush to have a lot in common.

Both are or at least can be beautiful. Diamonds are one of the shiniest gemstones (high refractive index if you’re science-minded) and can be perfectly clear or come in a wide range of colors. Gold is of course famously appealing to look at. Both diamonds and gold convey luxury and wealth, and both are regularly used to make luxury products such as rings, bracelets, watches, and earrings. 

The expense of both diamonds and gold is one reason why it’s so common for both diamonds and gold to be part of an engagement ring- the expense of these materials makes engagement rings expensive which helps them serve as a costly sign of commitment. 

Some have argued that the similarities between diamonds and gold are even greater, given that some are turning to diamonds as a store of value and as an investment. But this overlooks why gold has historically been preferred as a store of value to diamonds, and how new technological developments have made the differences between diamond and gold even greater.  

First, diamonds lack the history of gold. While gold has spontaneously emerged as a treasured metal and as a store of value or as a currency from civilization to civilization, the emergence of diamonds as a valuable commodity is much more recent and historically contingent. While diamonds were always recognized as gemstones, broad-based demand for diamonds did not emerge in the West until the 1800s and their famous role as the central stone in an engagement ring did not emerge until the mid 1900’s due to savvy marketing campaigns.

So demand for gold is more stable and organic than the demand for diamonds. When central banks look to preserve the value of their currency, they often increase strategic gold reserves, not strategic diamond reserves. 

While diamonds and gold might be seen as similar because both have industrial uses as well as usage in jewelry and investment, that overlooks the fact almost all gold is used for jewelry or as an investment while 80% of diamonds are used by industry. While every single ounce of gold could be used in industry, jewelry, or as an investment, because gold is fungible and divisible, the opposite is true for diamonds. Diamond value varies dramatically between individual stones. The value of a diamond depends on its size, its color, its clarity, and its cut. Many diamonds are worthless for any non-industrial purposes. While gold can be used as bullion converted to jewelry then melted back into bullion, cutting a diamond over and over would destroy its value. Demand for gold is driven by every sector. Demand for small industrial diamonds is not driven by demand for large diamonds that could feature in jewelry, and vice versa. 

Both gold and (gemstone quality) diamonds are valuable because of their relative rarity compared to demand. Gold is rare because the element, gold, is genuinely rare. Diamonds have been rare, because while they are made of carbon, a common element, the specific arrangement of carbon atoms that make up a diamond is rarely produced in nature, at least not in the form of large diamonds. 

But advances in technology have changed that. It is now much cheaper to buy a lab-grown diamond for an engagement ring than to buy a diamond mined out of the earth. And these lab-grown diamonds are not stones that happen to resemble diamonds such as cubic zirconia, they are genuine diamonds created in a lab. Advances in technology have driven down the prices of both lab-grown and naturally mined diamonds. The value of lab-grown diamonds is down by over 70% since the start of 2016 and even natural mined diamonds have fallen by over 25%. It is unlikely that technological improvements in creating lab-grown diamonds will stop improving meaning lab-grown diamonds will be able to supply diamonds to both the industrial market and the jewelry market.