The diamond industry is fascinating. Think about it, who decided that the stones should be so expensive? Why are there pricing disparities, even for rocks that fall in the same grade?
What is interesting is that very few companies control the diamond industry. As of 2020, ALROSA had the largest share at 27.5%. Next came De Beers at 23%, then Rio Tonto at 13.5%. In essence, it means that the major players can pretty much dictate prices.
De Beers, for example, hosts events to determine diamond pricing at least ten times every year. The company sets the price, and buyers can choose to accept or decline. The company also keeps a close eye on the sight holder companies.
They may not, for instance, sell the raw diamonds to retailers as it will lower the price of diamonds. Buyers tend to play by the rules fearing strict penalties. De beers can, for example, block them from future diamond buying events.
But, there is a lot more to consider. Once the raw diamonds reach the hands of third-party buyers, other factors come into play. There are handling fees, cutting, commissions, and much more.
So, how do you predict the price of a diamond if you are shopping for one? Let’s discuss.
Start With the 4 Cs of Diamonds
The critical predictors of diamond pricing are the 4Cs. You will find references to cut, color, clarity, and carat in the grading reports. But some nuances will have a huge role in determining the price.
- Clarity is the absence of blemishes or inclusions in the stones. There are grades that the industry uses. SI1 diamonds, for instance, have some pretty extensive inclusions. For the untrained eye, it can be hard to see some of the blemishes.
However, high relief inclusions are easier to see. But it doesn’t mean that the one with multiple inclusions does not look good. You can snap up some pretty attractive stones at lower prices. Of course, the best and most expensive stones have zero blemishes. On the GIA scale, they fall under FL.
- Cut quality is what brings out the brilliance of the stones. Different factors come into play. These include brightness, weight ratio, durability, and polish. Others are symmetry, scintillation, and fire. These cover the actual appearance of the cut diamond as well as craftsmanship and design. The greater the precision, the higher the cost of the final stone.
Please note that cut and shape are different terminologies in the diamond world. The shape is what you ask for when, say, designing your diamond ring. The most common are round, pear, oval, and princess cut. The round shape is the most popular, making it the most expensive.
- Carats are a measure of gemstone weight. One carat weighs 0.2 grams. There is a 100-point division for every carat. So, a 0.5-carat engagement ring is a 50-point diamond.
- Color is quite an interesting measure of value. The less the presence of color in the diamonds, the higher the value. But, here is why we use the term interesting. Diamonds come in a range of colors, including blue, green, brown, and yellow. To suit modern jewelry, demand for colored stones is increasing, making the price go up.
Supply And Demand Rules
Diamond mining companies can control pricing by limiting supply. This will typically happen when diamond prices are low. Now, what if a competitor continues to supply the market. Well, the limiting company can flood the market with high-quality diamonds at very low prices.
The competitor will find it very hard to continue operations as usual. De Beers historically kept a tight rein on the diamond industry with such practices. The company would even buy stones from diamond thieves. The aim was to prevent the sale of the rocks at below-market prices.
The supply and demand rule is pretty simple. If there are too many diamonds in the market, the price will be low. Indeed, think about it much like any other product in the market. The reverse applies as well. Few diamonds in the market mean higher prices. That may not be the best time to buy.
Point Of Purchase
You can predict the cost of diamonds by where you buy them. Online retailers, for instance, don’t have to deal with the cost of overheads. That means their operational costs will be much lower. They can pass on the savings to customers with lower pricing.
You can remove all the intermediaries if you buy the diamonds straight from the source, saving on the markups, commissions, and other fees. The longer the diamond travels along the supply chain, the more you can expect to pay.
The retailer you buy the diamond from also determines the pricing. The bigger the brand name, the more you can expect to pay. Think about it like buying a Birkin bag instead of any other brand. In the end, they may all be handcrafted leather bags, but you will be paying for the luxury of carrying a world-recognized brand.
Use the Rapaport Diamond Pricing List
The Rapaport price list is a vital tool for diamond dealers. It established diamond pricing in major markets and has become the global benchmark. The list goes out every Thursday. The prices on the Rap list have become a fantastic tool for predicting prices.
Retailers and wholesalers will price their diamonds slightly lower than what is on the list. The main shortcoming is that the list uses the 4Cs as per GIA. It does not consider other factors like adjusting prices or providing pricing for scarce stones.
Predicting diamond prices takes into consideration so many factors. Like any other product, supply and demand have a significant role to play. The more diamonds in the market, the lower the prices.
The second pricing predictor is the 4Cs. There is much to learn about cut, clarity, color, and carat. Yet, these are critical factors in the GIA grading.
The third factor is where you buy the diamonds from. Brand reputation matters, but it does not mean smaller brands don’t have good quality products.
Finally, you can take the route of using the Rapaport price list. It has been around for over 45 years, thanks to Martin Rapaport. As long as you are subscribed, you will get an updated list every week.