Strengthening Diamond Prices Lead to Increase in Demand—

and to Costly Mistakes Made by Consumers

By Antoinette Matlins, gemologist-consultant and author of many award-winning books, including Diamonds: The Antoinette Matlins Buying Guide: How to Select, Buy, Care for & Enjoy Diamonds with Confidence and Knowledge (GemStone Press)

Those seeking a sparkling diamond may be surprised to find that prices for fine diamonds have risen significantly over the past year, and there is no sign of diamond prices softening in the near future for rare quality stones weighing one-carat or more. Most experts agree that prices will continue to strengthen as wealth continues to spread globally, especially in China and Southeast Asia. Sales of high-quality diamonds to Asia are already much higher than ever before, creating a scarcity of fine diamonds in other parts of the world.

As scarcity and prices increase, however, consumers not only start looking to purchase diamonds, but they begin to pay more attention to comparative shopping and seeking the best price. This is where unknowledgeable and unsuspecting buyers may make serious mistakes; and the diamond they buy may quickly lose its sparkle!

Most people about to purchase a fine diamond have heard of the four Cs:

Color:

Graded on an alphabetical scale, beginning with the letter “D”—the rarest and truly colorless, like crystal clear water—through the letter “Z”—with each letter indicating a progressively more visible tint of yellow or brown.

Clarity:

The presence or absence of inclusions (internal characteristics that formed within the diamond as it was being created in the earth’s crust) or blemishes (minor surface characteristics that may also be removable by re-cutting). There are eleven grades on the GIA clarity grading system: FL (flawless); IF (internally flawless); VVS₁ (very, very small inclusions, first degree); VVS₂ (very, very small, 2nd degree); VS₁ (very small, 1st degree); VS₂ (very small, 2nd degree); SI₁ (small, 1st degree); SI₂ (small, 2nd degree); and I₁, I₂, I₃ (imperfections to the 1st, 2nd, or 3rd degree). There is no such thing as a truly “flawless” diamond, but if blemishes are not seen at 10-power magnification, a diamond will be graded flawless or internally flawless.

Cutting:

The shaping of a rough diamond into a polished gem. Regardless of the shape, the cut of any diamond is evaluated based on the precision that goes into the cutting, including the proportioning, symmetry, polish and many other factors. This is what determines how brilliant, fiery and lively a diamond will appear.

Carat:

The weight of the stone. Often mistaken for “size” (since round diamonds are cut to such precise proportions, a one-carat stone is always approximately 6.5 millimeters in diameter; a two-carat, 8.2 millimeters, and so on, so a “size” is associated with diamonds of a particular weight). The carat weight has a dramatic impact on value; price per carat increases as the weight increases.

While each of the four Cs has an impact on determining how rare a diamond is, and thus, its relative value, most consumers—along with many jewelers and diamond sales consultants—have only a superficial knowledge of each of these factors, and lack the experience and in-depth knowledge to understand their impact on the beauty and value of a specific stone. It is impossible to make a confident buying decision without seeing the gem being considered, and when more than one diamond is under consideration, seeing them side-by-side is essential. In today’s world it is also valuable to have guidance from an expert who can explain the differences and their impact on the stone’s beauty, desirability and value.

While space here is too limited to provide an in-depth explanation of the four Cs, I’d like to offer a few insights that I think a serious buyer needs to know in order to better grasp the complexity involved in diamond grading, and why it is necessary to work with someone knowledgeable. I will begin with the least understood factor: the “cut.”

Many don’t understand what is meant when experts refer to the cut. The cut does not refer to the “shape”—which is largely a personal choice—but rather, to everything involved in creating the finished diamond from the original rough diamond. The cutting—proportioning of the top to the bottom, the size of the large, flat facet on the top of the stone, the angles and shapes of each tiny facet placed around the diamond, along with other factors—is what creates a stone’s brilliance and fire. Differences in cutting alone affect value by 40% or more. More importantly, while diamond is the hardest natural substance known, it is also brittle, and cutting faults can make some diamonds more vulnerable to being damaged—chipped, nicked, or fractured—while being worn. For example, buying a diamond that has been cut with an extremely thin edge at the point where the top meets the bottom of the stone (called the “girdle”) could be risky since a sharp knock to the edge might result in a chip.

Color and clarity are also often misunderstood. It’s important to understand that a color grade falls within a range and a clarity grade is based on a combination of factors. Therefore, two diamonds with reports indicating they have “the same” color and/or “the same” clarity grade, could actually be not the same at all. There may be differences between the two—regardless of having the “same” grade on a lab report—that can significantly affect the price. While an expert can examine two diamonds that may appear to be the same quality based on grades shown on a report, and see the differences that affect price, someone who is not an expert will not see these differences or understand their impact on value. When considering diamonds from more than one seller, and comparing two stones with “the same grades,” unless each stone is seen and carefully examined by an expert, and assuming the reports are accurate, one can’t determine whether a seller is offering the best value. The cheaper stone may not be as good of a “value” or as wise a choice as the more expensive stone.

For example, let’s take two diamonds with a color grade of “E.” One of these E-color stones might be at the high end of the range, closer to the rarer D-color, while another may be closer to the less rare F-color. The cost of the high E-color will be more than that of the lower E-color. So, if someone is only looking at the price and the E-color, without realizing there is a difference, they may think the price being asked for the stone with the lower E-color is a better deal than the slightly higher-priced diamond with the higher E-color. In fact, the “value” is the same; the price difference is a reflection of differences in the color, despite the grade shown on the report.

The same can be said for diamonds with the same clarity grade. The clarity grade is a cumulative grade that takes into consideration many things—how many “inclusions” there are, what type of inclusions are in the stone (crystal, fracture, needle, etc), their color, their location and whether or not they affect the stone’s durability. So here again, one can have two diamonds with the same grade which are quite different from one another; one might have fewer inclusions, but they might be larger, black in color and located in the center of the diamond where they can be seen with the eye alone, while the other may have smaller, white inclusions, located where they are much more difficult to see. Or, one may be essentially “flawless” except for one internal characteristic—a crack that puts the stone at risk of damage. While the grade may be the same because it is a “composite” grade that takes into consideration everything in the stone, the cost will not be the same; differences among stones with the same clarity grade affect a stone’s value.

Carat weight is fairly straightforward, and can be easily checked if the stone is not mounted in jewelry, but when mounted, it is not so straightforward. As mentioned, value is affected by the weight, and the cost per carat increases exponentially at each carat mark; a one-carat diamond is more than twice as much as a ½ carat diamond; a two-carat diamond can easily cost more than four times the cost of a one-carat stone. For example, a round diamond weighing one-carat might sell for $12,000 per carat x 1 = $12,000; a two-carat stone of the same quality would sell for $25,000 per carat x 2 = $50,000! However, if a diamond has been re-cut since the GIA report was issued, and dropped beneath the weight shown on the report, its value may drop dramatically. For instance, if a jeweler had sold a 1.01 carat diamond and the owner damaged it and had it re-cut, following which the weight was 0.99 carats (which is under the one-carat mark), the loss would not be just a couple hundred dollars for losing 2/100s of a carat in weight, but 10x that amount. The loss in value would be $2,000 because the cost-per-carat of a stone weighing between 0.90-0.99 carats is only $10,000 per carat rather than $12,000 per carat! But the owner still has a lab report that says the diamond weighs 1.01 carat—and it is unlikely anyone will receive a new GIA report for some time.

The bottom line is that many diamond buyers today have been led to believe that as long as the diamond has a diamond grading report from a respected lab such as GIA, they have nothing to worry about because they will have the exact weight, color-grade and clarity grade and so it’s just a matter of finding which seller is offering “the same quality” at the best price. This is a myth and will lead to costly mistakes.

It is essential to understand that one cannot simply rely on a lab report alone. To underscore this point, let me share an experience I recently had while searching for a diamond for one of my own clients. I learned about two diamonds that were almost identical according to the GIA reports. One, however, was significantly cheaper than the other. Nonetheless, even though I knew there must be a reason, I decided to examine both stones because the cheaper stone might have been okay, depending upon the reason(s) for the cost difference. I examined the cheaper stone first. Despite it having the “same” clarity grade (VS₂), it had a crack that extended into an extremely thin edge (the edge or perimeter of a stone is called the “girdle”). An extremely thin girdle alone can be cause for concern if it extends for any distance around the stone. This stone’s extremely thin girdle extended almost 1/3 of the way around one end of the stone. Diamond is the hardest natural substance, but it is also brittle and a thin edge can be easily nicked or chipped. In this case, the extremely thin girdle at one end would have been a serious fault of its own. But this wasn’t all; the crack that was present within the extremely thin part of the girdle made it far more likely this stone could be damaged. This stone was cheaper because it had a very high probability of being seriously damaged from a sharp blow! Even though it received a very good clarity grade (because it had almost nothing else inside the stone), it was not a “good stone.” Someone who didn’t examine it carefully might have thought they were getting a bargain, when this was clearly not the case.

In addition to understanding that laboratory reports tell only part of the story, consumers should also understand that there are many counterfeit GIA reports, and more importantly, a diamond can be damaged or altered after a report was issued.

I advise buyers seeking a diamond today to try to find a jeweler who is a “gemologist” skilled at grading diamonds, or a gemologist-consultant. Not only will they have the skills to double-check any diamond accompanied by any laboratory report, and confirm that the quality of the stone matches what is on the report, they will also be able to accurately grade diamonds not accompanied by GIA reports, including smaller diamonds used as accent stones in rings and other jewelry settings. They can also help one understand differences between stones they may be considering, so that the choice is based on all fact.

It is equally important for consumers to buy from someone they can locate should they discover that anything is wrong. This may be a problem when buying from internet vendors unless planning to make arrangements to verify the facts, as recommended below, before paying for the diamond. If not, buyers should not purchase from an internet vendor.

Buying fine diamonds should be fun and exciting, and when purchased from knowledgeable, reputable sources, this is usually the case. However, it’s not as simple as just “having a lab report” and comparing prices based on grades on the report.

No matter who the seller is, I always recommend that buyers: 1.) Make sure the seller is able and willing to give you the specific facts related to the quality of the stone, the four Cs—color, clarity, carat weight, cutting grade and to ask explicitly if the stone has been treated in any way. They should also check whether or not anything about the stone would make it more prone to damage; 2.) Make sure the seller puts all representations about the diamond, in writing, on the sales receipt; 3.) Verify the facts with an independent gemologist-appraiser who holds respected credentials. Visit one of these websites to find someone reliable: www.appraisers.org; www.accreditedgemologists.org; www.americangemsociety.org).

The last step is the most important step. Buyers should never make the mistake of assuming that if the seller is willing to put everything in writing that they “must be telling the truth,” therefore causing the buyer to skip this last step. Some of the most unscrupulous jewelers have been in business for many years because they realize they can put virtually anything in writing without risk of someone ever checking it out. Only by finding someone with the “right” credentials and taking the time to have them verify the facts, will a consumer know whether or not the seller was reliable. NOTE: there are many unscrupulous appraisers working in collusion with dishonest jewelers, especially in “wholesale diamond districts” around the world. This is why it is essential for buyers to seek someone with a respected certification.

If everything checks out, the purchase can be enjoyed for years to come. If not, buyers will have documentation that will enable them to get their money back, regardless of store policy—if the facts have been misrepresented, the law requires sellers to offer a refund.