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Diamond Prices - How it is fixed @ Jewel Info 4 UBy:Ardamun
How Are Diamond Prices Fixed?
Looking at it from one angle, a diamond is just a stone. From the other
angle, it is the most beautiful and perhaps the most expensive gem that is
used for human adornment. Say the name, and women go gaga over it. The value
of diamonds as an item of decoration goes far back into the mists of
antiquity. Though they have been known to exist for millions of years, its
earliest written reference was found in the ancient Sanskrit text -
Arthshastra - around 289 BC.
Up to the mid-18th century, India led the world in diamond production, till
a source was found in Brazil in 1725. Today, there are huge diamond deposits
in South Africa, Namibia, Botswana, the Democratic Republic of Congo,
Angola, Tanzania and Sierra Leone, among other places. Over 100 million
carats of industrial diamonds and over 30 million carats of cut and polished
diamonds are sold every year, totaling a value of above $9 billion.
Pricing of Rough Diamonds
The pricing of rough diamonds is purely in the hands of
De Beers. Since its
founding in 1888, De Beers have held a dominant position in the diamond
industry, and today significantly control a major portion of the world's
rough diamond production mines. It is said that today more than 50% of the
world's rough diamonds pass through its subsidiary in London - the Diamond
Trading Company (DTC).
Ten times in a year, DTC invites its favored clients - called 'sightholders' -
to London, and offers them self-sorted batches of diamonds on an 'as is'
basis. These 'sightholders' are the world's leading diamantaires, well known
for their diamond and marketing expertise. The DTC decides the quality of
the diamonds to be distributed to each 'sightholder', and how the total supply
of uncut, rough diamonds will be distributed.
Each batch is a mix of diamonds of various classifications, quantity, and
quality, and who gets which batch is pre-decided by the DTC. De Beers keep a
strict control over the distribution of diamonds, which they consider is
crucial to the survival of the diamond industry. The price of the batch is
also pre-determined by De Beers and is not negotiable. The price De Beers
charges its 'sight holders' are at least 25% lower than the wholesale price for
uncut diamonds. This is the price the 'sightholders' pay, without any
bargaining or haggling, to ensure invitation to future sights.
Through this mechanism of 'sights' in London, De Beers control the value of
diamonds. Without this control, the worth of diamonds would be much less.
Pricing of Cut Diamonds
The prices of cut diamonds change every week and depend on the 4 Cs - Carat,
Color, Clarity, and Cut. The difference of one grade in color or clarity
could affect the price of diamonds by as much as 3% to 25 %. However, the
price of the famous diamonds, such as the Hope diamond, would not depend on
the 4 Cs, but would be priced because of their prominence. Over and above
the 4 Cs, unusual shapes and cuts may also reflect in the price.
The clarity and color of the diamond depends on personal perception and is
open to interpretation. There are 4 major gemological associations, which
certify the 4Cs on which the price of diamonds is based. These are:
* Gemological Institute of America (GIA) - It was the first laboratory to
issue modern diamond reports, and has the highest reputation amongst
gemologists for its consistent grading.
* American Gemological Society (AGS) - It, too, has a high reputation.
* International Gemological Laboratory (IGL) - Is considered to be less
consistent than the GIA and AGS.
* European Gemological Laboratory (EGL) - It carries a similar reputation to
the IGL.
Most jewelers use the Rapaport Diamond Price sheet - the weekly price list
that reflects the wholesale price in the Diamond District of New York City.
Different colored fancy diamonds are priced separately from the conventional
colorless diamonds.
Carat - A Carat is equal to 200 milligrams and the diamond's weight is
calculated to the nearest 1/100th (0.01) of a carat - which is expressed as
a 'point'. Carat is usually abbreviated as 'ct' and is referred to the
weight of a single diamond. The abbreviation 'ct TW' is used to express the
total carat weight of multiple diamonds in a piece of jewelry.
All other parameters being equal, the price of a two-carat diamond is not
necessarily only double that of a one-carat diamond, but could be much
higher as larger diamonds are rare and much more in demand for use in
jewelry.
Color - Color is a significant factor when buying diamonds. A perfectly
transparent diamond with no hue, or color, is considered a perfect diamond.
The Gemological Institute of America (GIA) introduced a color grading system
in the late 1950s, with the color scale ranging from D (Colorless) to Z
(having a bright yellow coloration). The gradings are:
* D E F - Colorless
* G H I J - Near Colorless
* K L M - Faint Yellow
* N O P Q R - Very Light Yellow
* S T U V W X Y Z - Light Yellow
The absence of color makes the diamond more valuable and its price changes
significantly with each color grade.
Clarity - It is the clearness or purity of a diamond. It defines the
presence or absence of the diamond's internal flaws. It is very rare to see
a perfect diamond having perfect clarity. Diamonds have inclusions in them
and more clear the diamond, the higher its price. The clarity scale is a
measure of the severity of these inclusions or imperfections. The clarity
grading is done under a 10X magnification.
The clarity grade scale by the Gemological Institute of America (GIA) is the
accepted norm globally. The gradings are:
FL - IF stands for Flawless and Internally Flawless. FL graded diamonds
show no flaws and are the rarest, most beautiful gems, and high priced - all
other things being equal. IF graded diamonds reveal no inclusions and only
insignificant blemishes under a 10X magnification.VVS1 - VVS2 stand for Very Very Slight Inclusions. These diamonds are
excellent quality gems with inclusions that are very difficult to see.
VS1 - VS2 stand for Very Slight Inclusions. Inclusions can only be
pinpointed under 10X magnifications but not visible to the naked eye. These
are lower priced than the VVS1 - VVS2 grades.
SI1 - SI3 stand for Slight Inclusions. Seeing inclusions with the naked
eye may be difficult but easily visible under 10X magnification.
I1, I2, and I3 stand for Imperfect. Though they may or may not be seen by
naked eye, the inclusions and imperfections affect the brilliance of the
diamond.
Cut - A good cut adds to the inherent beauty of a diamond and refers to its
shape and proportion. A well-cut diamond will reflect light evenly across
its surface, maximizing its brilliance. A deep-cut or a shallow-cut will
take away from its beauty. Diamonds are cut in a wide variety of shapes,
such as round, oval, marquise, pear, emerald, radiant, princess, and heart,
with the round brilliant cut being most in demand.
Less than 1% of all diamonds are cut to ideal proportions as they are cut
for weight retention. Often some of the beauty is sacrificed to minimize
weight loss to get a larger finished diamond. The American Gemological
Society's Ideal Specifications rate the cut quality on a scale from 0 to 10,
0 being the perfectly cut diamond for maximum brilliancy.
Other than the 4 Cs, there are at least 13 other factors, such as
fluorescence, table percentage, symmetry, that affect the diamond's price.
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