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Is the World Running Out of Diamonds?

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"Unless major new discoveries are made in the coming years..."

Image via Shutterstock

A worldwide diamond shortage could be coming soon, according to the company that could stand to make billions of extra dollars from a worldwide diamond shortage.

But the shortage, like the value of a diamond, could be an illusion.

De Beers, the diamond cartel that has tightly controlled a huge chunk of the global diamond trade since the late 1800s, announced Wednesday that diamond mines were drying up and, as Agence France-Presse reported, that could drive up the price of the rocks in coming decades.

"Unless major new discoveries are made in the coming years, supply can be expected to decline gradually from 2020," De Beers forecast.

Image via Shutterstock Photo credit: Shutterstock

De Beers said mines in Botswana, South Africa and Namibia are becoming depleted and that miners are being forced to explore Canada, Siberia and central Africa in pursuit of new diamond sources.

As diamonds get harder to find, demand is rising worldwide, AFP reported, with the burgeoning middle classes in India and China snapping up the stones that adorn the typical American engagement ring.

De Beers CEO Philippe Mellier predicted that Chinese demand for diamonds would grow by 10 percent annually for "many more years."

But while global demand may be rising, the notion that supply is truly shrinking seems doubtful.

De Beers, which currently accounts for roughly one-third of the world's diamond trade, has a long history of stockpiling diamonds to artificially jack up prices, and, as the Washington Post reported in 2010, even as other companies broke De Beers' effective monopoly on the diamond trade in the 1990s, diamond sellers still kept supply under control, holding on to large caches of diamonds (or selling them to banks, which held on to them) instead of flooding the market and driving down prices.

It seems likely that there's a healthy supply of already mined diamonds being stockpiled, and while South African mines may be depleting, there's another country that still has plenty of the rocks: Russia.

As ZeroHedge noted in 2012, Siberian diamond reserves are estimated to be massive, holding trillions of carats.

Issues of supply and demand don't even touch on another, fundamental issue with diamonds: They're not worth nearly what we pay for them.

Edward Jay Epstein chronicled the "diamond invention — the creation of the idea that diamonds are rare and valuable, and are essential signs of esteem," in a 1982 piece for the Atlantic.

His conclusion: The average consumer will never, ever be able to resell a diamond for anything close to what he or she paid for it, because the value of diamonds is wrapped up in the clever control of global supply and, just as importantly, in the emotional manipulation of consumers looking to express their undying love for one another through an engagement ring.

Try bringing those emotions back to a gem dealer, and you'll get, as Epstein noted, maybe 50 cents on the dollar.

Further evidence that diamond prices are driven less by genuine supply and demand and more by careful market manipulation: De Beers is looking into the second-hand diamond trade, South Africa's Business Day reported Wednesday, as gem experts said the company is "worried" that their business could take a serious hit if people sell their own diamonds en masse.

Follow Zach Noble (@thezachnoble) on Twitter

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