A widening wealth gap appears to be driving increased demand for luxury jewellery, according to Paul Zimnisky, a prominent diamond industry analyst. As the wealthy continue to spend big on high-end jewellery, demand for more affordable pieces is waning.
The growing disparity in global wealth has been a persistent trend for decades, accelerating significantly during the pandemic. Government policies during this period, including record-breaking economic stimulus measures, led to a surge in asset prices.
In the early 1990s, the richest 1% of Americans held 17% of the nation’s wealth. Today, that figure has climbed to 27%, according to data from the U.S. Federal Reserve. Meanwhile, wealth held by the middle class—defined as those earning within the 20-80% income range—has decreased from 37% to 27% over the same period. This middle-class group represents over 200 million Americans, while the top 1% comprises about 4 million people.
Globally, the disparity is also stark. Developed countries, which make up just 21% of the world’s population, hold 69% of global wealth, according to Oxfam. Before the pandemic, incomes in the poorest 40% of countries were growing faster than the global average. However, this trend reversed sharply in 2020, marking the largest increase in income inequality between poor and wealthy nations in three decades.
Luxury consumers, particularly in the diamond and jewellery sectors, have responded to these economic shifts. In May, Richemont, the parent company of Cartier and Van Cleef & Arpels, announced plans to increase its marketing budget for “high jewellery events” after continued strong performance in the high-end category. Although “high jewellery” lacks a formal definition, it generally refers to pieces priced at six figures or more.
In July, LVMH, the parent company of Tiffany & Co., revealed its strategy to raise the average price of its offerings, not just by increasing prices but by selling more expensive items. Bloomberg reported that Tiffany is encouraging its staff to focus on selling higher-end jewellery, with increased commissions for items priced at $75,000 and above.
While the high-end market thrives, Tiffany has noted a decline in demand among “aspirational” customers who typically purchase lower-priced items, reflecting a broader industry trend.
The luxury market’s strength is also evident in auction sales. In May, a 1.56-carat fancy-red diamond, known as the “Argyle Phoenix,” sold for $4.2 million at Phillips Geneva, setting a record for the highest price ever paid for a red diamond.
Tiffany’s acquisition of a lot of 35 Argyle pink and purple diamonds last year further solidifies its position as a leading purveyor of rare and exceptional diamonds. While pink and purple diamonds are generally less valuable than reds, the most coveted Argyle pinks have been known to sell for over $1 million per carat, often reaching six-figure prices.