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There are a few factors. One is that they are extremely beautiful. Another is that they are very expensve to extract from the ground. A third is that they are rare and it costs a lot of money to find them (like Alexandrite). A fourth still is marketing which generates demand. Diamonds shouldn't be as expensive as they are but the De Beers cartel kept production low and launched ad campaigns to keep demand high, effectively inflating the price.

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Q: Why are gemstones expensive?
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