Both gold and diamonds are highly valued commodities, but which one is ultimately cheaper? The relative costs of gold and diamonds can vary significantly depending on factors like quality, source location, market conditions and more. However, when examined at a broad level, gold tends to be less expensive per unit than diamond on an overall basis.
Average Prices
As of October 2023, the average price of gold is around $1,650 per troy ounce. The average price of a 1 carat diamond of fair quality is around $3,500. Right away, this suggests that gold is the cheaper of the two by weight.
However, it’s important to note that diamonds are measured in carats, which refers to weight, while gold is measured in troy ounces. One troy ounce is equal to 31.1 grams, while a 1 carat diamond is equal to 200 milligrams (0.2 grams).
When converted to the same units, a troy ounce of gold is worth approximately:
- 65,250 USD per gram
- 3.26 million USD per carat
So in direct carat-to-carat or gram-to-gram comparisons, diamonds are far more expensive than gold.
Factors Affecting Price
Several factors influence the relative prices between gold and diamonds, including:
- Quality – Higher quality and clarity grades dramatically increase diamond prices compared to lower grades. Gold prices are less affected by purity levels.
- Source – Mined and lab-grown diamonds have vastly different prices. The source of gold does not affect its price as much.
- Supply and demand – Gold prices are more sensitive to economic factors impacting supply/demand. Diamond prices are more controlled by major suppliers.
- Brand value – Branded diamond retailers command higher premiums than commodity gold sellers.
These factors demonstrate why diamond can sometimes appear cheaper than gold in certain situations – such as when comparing a high quality, branded diamond to a commodity grade of gold. However, in general, gold remains less expensive per unit weight.
Price Trends Over Time
Historically, gold prices have been less volatile than diamond prices. In the last 50 years, gold prices have varied between about $300-2,000 per ounce when adjusted for inflation. Diamond prices ranged from $1,500-12,000 per carat over the same period after inflation adjustment.
| Year | Gold Price (USD per troy oz) | Diamond Price (USD per carat) |
|---|---|---|
| 1970 | $596 | $2,740 |
| 1980 | $2,086 | $8,710 |
| 1990 | $701 | $3,216 |
| 2000 | $612 | $2,823 |
| 2010 | $1,389 | $6,407 |
| 2020 | $1,925 | $8,907 |
While both commodities saw wild price swings, gold prices were more stable overall compared to large increases and decreases in average diamond prices.
Production Costs and Markups
The production costs also favor gold in terms of value per unit weight. It costs between $500-800 to mine and refine an ounce of gold ore. Diamonds have a much wider range based on location, but average around $120-$140 to produce a rough 1 carat diamond from the ground. However, after polishing, cutting and distribution costs, the final sales price of mined diamonds approaches 100x the production cost. This demonstrates the incredibly high retail markups associated with the diamond trade, which is less prevalent with commoditized gold.
Investment Value
As investment assets, gold and diamonds differ significantly. Gold prices reflect global markets and are easily tradable, making gold a popular commodity investment. Diamonds have poorer liquidity, making them a riskier asset. Between 1978-2020, gold prices increased on average 10.6% annually, easily outpacing inflation. Diamond prices increased only 2.7% above inflation over the same period, underperforming many other assets.
Conclusion
While diamond prices can sometimes dip below gold prices depending on specific grades, gold is unambiguously less expensive than diamonds in typical comparisons of equivalent weights. Factors like quality variation in diamonds, retail markups, investment value and production costs all favor gold as the cheaper commodity overall. The historical stability of gold prices also make it generally more affordable than diamond prices, which have been more volatile over time.