How to Sort Through Diamond Prices

Diamond pricing is tricky business.  You may have noticed this when you browse different listings and you see two stones that look just about the same, yet their pricing is totally different.  So how can you know what is a good price?

Diamond prices already start out artificially inflated.  Diamond is one of the most abundant gemstone in the world.  But diamond suppliers keep prices high by controlling the market:  most mines are owned or co-owned by the same supplier (de Beers), new mines are bought out and shut down or production slowed, and diamonds are stowed away when prices are too low so that supply is choked off.  Even independently owned mines in Australia and Canada adopt similar strategies because it is not in their interest to lower the retail market value. 

Because diamonds are a controlled market, it is easier for industry to then establish “list” prices, available to wholesalers via trading networks like Rapaport and other diamond exchanges.  These keep track of diamond sales and adjust prices accordingly – despite lists, prices do fluctuate, in other words.  This is how the price lists look:

http://www.ajediam.com/diamond_price_scope.html

In industry, gems are then traded at various “discounts” off “list price”.  Common discounts are just a few per cent, however.  Retail pricing is calculated by doubling list prices (or more).

There is also a market in used diamonds.  When old gold is sold (i.e. through pawn shops, or companies that collect old gold and pay out cash to consumers), any gem contained in the jewelry is broken out.  Refineries buy gold, not gems.  Some shops collect them and then resell unsorted parcels of colored stones at pennies.  Or the occasionally valuable gem at more.  Diamonds are sold to dealers and setters for cash, which is anywhere between 20 and 50% off list price. 

Your objective, when you buy a diamond, is to get as close to the Rapaport list price as possible.  For this, you need very exact information: the per ct size down to the last point, color and clarity.  This is because a half ct diamond for instance can cost a couple of thousand dollars if it’s flawless and colorless, and it can cost $50 if it is totally dead.  Many list prices stop at M color, I3 clarity, but there much is worse stuff out there.  When you decide what you want, see what color and clarity grade you can live with before you shop around.  I would be very happy with a G/H color VS2 when buying a fine diamond, but if I wanted a brown or yellow diamond, I might take an SI2 or SI3 – visible inclusions that is.  The most important thing in a diamond, for me, is brilliance.  Even an SI3 can be very brilliant and I then won’t care that it has bubbles in it.  

The next thing you need to find is a price list.  This is the trickiest part.  The above link is very useful, it’s not up to date but that’s ok (and I think it’s not entirely wholesale either).  You can also go to sites like Price Scope to see what their list prices are – or try to look around and get an average, then figure that wholesale is half of that.  Current Rapaport prices are a well kept secret, I don’t have access either but all the diamond dealers I know do, and so do the labs, so I can request a list price at any time.  You can average yours out over several websites.

When you are making a larger diamond purchase, you should definitely get a certificate as well.  Most 1+ carat diamonds are traded by the cert, meaning only the cert is shown around, not the actual stone.  GIA is the most commonly accepted, and the strictest in terms of rating.   EGL is also used (especially for vintage diamonds because they use a different scale for those, whereas GIA uses the same for all white diamonds, regardless if the cut is vintage).  With a non-GIA certificate, smart buyers assume a less stringent rating and can thus expect to get a lower price.  So, if I want a fine diamond and only an EGL is available which rates the stone SI1, I might assume GIA rates it SI2 and try to buy the diamond at the SI2 price.

Two last observations: many diamonds are irradiated for extra color, and white diamonds lazer enhanced to get rid of inclusions.  These treatments need to be disclosed by law.  Still, you should ask.  Someone may have “forgotten” to tell you, but when you ask, they can’t forget to respond.

Second: vintage stones and colored diamonds are often traded at a premium.  Vintage gems cost up to 30% above list, and colored diamonds are all over the place depending on what color and size.  Browns and champagne colored stones cost less than white, but natural yellow, pink, and on the extremely rare end, blue, green and red, can be very expensive.