Much of the value of your new diamond is going to be based on the 'grade' of the stone.
This is a ranking of your stone relative to other diamonds that you may have seen. A better stone will bring a higher price. For this reason, the grade of the stone turns out to be a terribly important issue. Although it is a bit complicated, the basic ideas are pretty simple.
Back in the 30's a non-profit group called The Gemological Institute of America was formed to standardize the way diamonds were graded and to train people to grade them that way. Before GIA, diamonds were assigned grades like "Top Wesselton" and "Cape" that were based on the mine of origin. Even those in the industry were confused when the traded amongst themselves. The GIA divided the grading into 4 categories that they called the 4C's; Carat Weight, Clarity, Color; and Cut. In particular, Clarity and Color were assigned their own special scales that are still known as the GIA grading scale. The GIA has a division called the Gem Trade Laboratory (GTL) that offers grading reports on individual diamonds. These reports are popularly known as 'GIA Certificates'. These certificates, or others like them, accompany most major stones that you will see.
Click here to learn more about GIA
The people trained by the GIA to grade stones are called gemologists. This is a specific designation from the GIA School to indicate someone who has completed that program. 'Graduate Gemologist' is the top designation from the GIA in their gemological program and will be designated in documents with initials G.G. after a name. There are several other agencies that compete with GIA for gemological training and give different designations. The Gemmological Association of Great Britain, for example, issues F.G.A..
Since then, the GIA has become huge. Their lab is the dominant brand name in diamonds. They just moved to a lovely new campus in Carlsbad California and, despite their non-profit status seems to be rolling in money. This has given rise to competitors. Grading certificates are offered by at least a dozen companies throughout the world and gemological training is available from at least 5 that I know of. They all describe the basic information about the stone and often they often add a few things that are just their own. For the most part, they all use the GIA method for grading clarity and color. These scales are explained individually under their respective sections of this document with links to each in the left margin.
Please notice that the chapters about the 4C's actually contain 6C's. There are probably more but I have to stop somewhere.
Color in diamonds is caused by trace chemicals occurring in the earth where the rough crystals formed over millions of years.
D-Z Color Range
Most diamonds are graded using the GIA developed D-Z color grading scale where D is at the top, Z is notably yellow or brownish, and the letters in-between descend very gradually. DEF are considered colorless and GHIJ are considered near-colorless. The colorless and near-colorless ranges are the most popular among diamond buyers as the differences are extremely subtle. Below J, diamonds show progressive levels of “warmth” seen as a yellow or brownish tint.
Fancy Colored Diamonds
A small percentage of diamonds with more color saturation than Z are called “Fancy Colored Diamonds,” or FCDs. Yellow or brown FCDs run from light to vivid. Additionally, FCDs may be an altogether different color like pink or blue. All Fancy Colored Diamonds are graded using a different scale and approach than diamonds in the normal D-Z range.
Diamonds in the normal D-Z range are graded face-down, viewed through the side of the pavilion. This is because shape and cut quality both influence how light gets in and out of the diamond. Grading face-down allows for a neutral assessment of body color. The descending grades from D to Z are very gradual.
The result of face-down grading is the fact that several diamonds of same-grade can appear different colors when viewed face-up. This can be influenced by several factors, including the following:
Laboratory Standards: Different laboratories have slightly different standards for color. Please see the page on Grading Laboratories for more information.
Shape: Brilliant cutting styles return light to the viewer more efficiently than step cuts, so a round brilliant may show less apparent colour face-up than an emerald or Asscher of the same grade.
Fluorescence: A diamond in the near-colorless or faint yellow range may have it’s face-up colour reduced by medium or stronger blue-fluorescence. This is only seen on a case-by-case basis.
Cut-Quality: A diamond cut with the critical angles and precision needed for highest performance have shorter ray-paths reducing their face-up colour; in some cases by multiple grades.
Color and cutting are related.
The finest cut round brilliants often face up with less color than the laboratory colour grade they were assigned, which was determined face-down. Why? Because light gets in and out of the diamond faster, on shorter ray-paths. This is the opposite with poor cutting, where critical angles are missed and light rays either escape through the pavilion or make multiple bounces before leaving, illuminating body tone. Poorly cut stones can face up noticeably darker.
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The cut of a diamond refers to everything man has done in the process of converting it from a piece of rough, natural diamond material into a finished gemstone capable of the beautiful brightness and sparkle which makes diamonds the most popular of all precious gems. The details of cut include shape, make, angles, proportions, optical precision, weight ratio, facet symmetry and final polish. These specifics all combine to determine how the diamond will appear as it travels through the world’s many lighting conditions.
Most Important. Least Discussed.
Although geometry is the most important component for diamond beauty, it’s typically discussed far less than color and clarity in most places. One reason is that color and clarity grading are easily learned by new sales professionals. But understanding the many details of optics requires a stronger commitment, as well as foundations in geometry and physics. It’s worth noting that most diamonds are made to average quality and in-depth discussions about geometry would reveal that lack of quality in average stores. The fact that many grading labs include little or no information about the make only underscores the resistance to education felt in commercial markets.
Top Cut -Improves All.
Diamonds in the top few percent of the world’s cut actually improve in the other Cs: They appear larger for their carat weight, face up more colorless and clarity characteristics can be less visible. Most importantly, they explode with dazzling whiteness and rainbow colors, even away from jewelry store lighting where most diamonds go dark.
Helps Size Appearance:
A diamond designed for the highest level of visual performance appears larger than diamonds of average cut quality because they are bright all the way from edge-to-edge, not just bright in the center.
A diamond with the critical angles and precision needed for highest performance has shorter ray-paths reducing face-up color; in some cases by multiple grades.
A diamond planned for highest performance boasts superior brightness and scintillation, even when removed from jewelry store lighting, which helps to “mask” inclusions.
Laboratory Standards: Different laboratories have radically different standards. Please see our page on Grading Laboratories for more information.
Shape: Brilliant and mixed shapes like round brilliant, princess and cushion, have a different “flavor” than step cuts such as emerald and asscher.
Nearly all diamonds have natural characteristics that formed within the rough crystal over millions of years of growth. Most are microscopic and need magnification to detect. Others may be visible to the naked eye.
What is certain is that no two diamonds are the same. Each is like a snowflake; never repeated in nature. In fact, one sure way to identify your diamond is to learn where a primary inclusion lies. Depending on the diamond’s clarity specifics – and your eyesight – it may be possible with no aid, or it may require a magnifying device. Either way, every diamond’s inclusions tell a special story that is absolutely unique.
Blemishes and Inclusions
Clarity characteristics are separated into two broad categories: Blemishes, which are external, and Inclusions, which are internal. The laboratory grading report will list all characteristics, in order of importance, with the primary characteristic(s) “setting” the clarity grade.
The clarity grade is determined by examining the diamond face-up at 10X magnification in neutral lighting. Five factors are considered: These include the size, number, position, visibility and type of characteristics visible at 10X magnification. If the implications are minute or minor the clarity grade is likely to be high. If the implications are noticeable or obvious the clarity grade will be lower.
- When strictly graded, FL and IF indicate the diamond is Flawless, or Internally Flawless; revealing no inclusions at this magnification.
- VVS1 and VVS2 indicate Very Very Slight inclusions; meaning that only minute characteristics were detected.
- VS1 and VS2 imply Very Slight inclusions; the grader saw only minor characteristics.
- SI1 and SI2 grades indicate the diamond was Slightly Included; inclusions were notable under 10X magnification.
- I1 means Included; characteristics were obvious to the grader when magnified
- .The I2 and I3 grades are reserved for diamonds with extremely obvious inclusions and/or durability issues caused by the inclusion type.
While diamonds are graded under 10X magnification they are not graded outside the ‘scope. This means that several diamonds of same-grade can appear differently to the naked eye. This is further influenced by several factors, including the following:
Laboratory Standards: Different laboratories have slightly different standards for clarity.
Shape: Brilliant cutting styles have greater faceting complexity and less transparency, so a round brilliant may show inclusions less than an emerald or Asscher of the same grade.
Size and Number:An inclusion plot that looks “clean” may not correspond to a cleaner presentation, since a single grade-setting crystal may be more naked-eye visible than several smaller crystals which set the same clarity grade collectively.
Position and Visibility: A diamond with a dark central inclusion can present with far more naked-eye visibility than one with a transparent inclusion under a girdle facet, yet both diamonds might have the same clarity grade.
Cut-Quality: A diamond cut with the critical angles and precision needed for highest performance boast superior brightness and scintillation, even when removed from jewelry store lighting, which helps to “mask” inclusions.
Cut quality affects visible clarity
Diamond weight is expressed in carats. Carats are further divided into 100 “points” so that a 0.90 ct diamond may be called a 90-pointer, a 0.88 carat diamond an 88-pointer and so on. The word ‘carat’ has roots in ancient times, when diamonds were compared against carob beans by traders in the Ottoman Empire.
Carat weight is NOT size. Diamonds with the same carat weight can have smaller or larger vertical spreads, depending on the geometry of their cut. This is no different than two people weighing the same, but one is taller and the other is wider.
Shallow and Deep Diamonds
Carat weight influences price more than any other factor so the goal of mass-manufacturers of diamonds will always be keeping as much weight from the rough crystal in the diamond as possible. This is even more important than the beauty of the final product since bigger diamonds bring bigger money. The result is millions of diamonds on the market which sparkle under bright lights (all diamonds do) but have average performance in normal lighting.
Fine Make Diamonds
Diamonds cut with a goal of beauty and high performance are proportionate, with critical angles and precision-cutting that will promote the best brightness, dispersion and scintillation, even in normal and romantic lighting. Such high performing diamonds appear larger than diamonds of normal cut quality because they have edge-to-edge brightness, not just a bright center. Because it costs more to fine-tune the rough to this degree of beauty, these diamonds are far more rare than shallow and deep diamonds and cost a bit more.
The example above, with a spread of 6.30 millimetres was cut slightly “deep” and will look smaller than a proportionate one-ct diamond, spreading closer to 6.50 mm. The example on the left above has greater spread, but was cut “shallow” and will lack the critical angles necessary for performance, reducing edge-to-edge brightness and potentially increasing dark zones.
Carat Weight and Laboratory Grading
Carat weight is standardized and repeatable around the world. What is not repeatable is the assessment of whether a diamond is too shallow or deep to promote optimum light return.
A skilled diamond cutter can plan the “lay” of a grade-setting inclusion to reduce its face-up visibility. It may be impossible to omit a primary characteristic (and the resulting clarity grade) but a skilled cutter can orient the rough so that they become transparent or less visible. This is particularly true for SI1, SI2 and I1 clarity grades.
Investing in Diamonds
Certificates (Grading Reports)
A diamond of any notable value will be sold with a Certificate or Grading Report from a grading laboratory. This document will describe the diamond’s carat weight and basic measurements and give an assessment of its color, clarity, and other details.
“Certificate” is a misnomer. These documents clearly state: “This report is not a guarantee or valuation.” Nothing is being certified, so the proper term is Grading Report.
No Legal Standards
There are no legal standards enforced for diamond grading in the USA. A diamond’s Grading Report is not a legal document. In fact, it can pose the opposite problem by bringing false confidence:
A diamond given E Color by a soft lab could actually be F, G or lower at a strict lab.
A diamond given VS2 Clarity by a soft lab could be SI1 or lower if sent to a strict lab.
A diamond given a cut grade like “Ideal” by a soft lab might never be Ideal at a strict lab
Certain stores and discount outlets have huge contracts with soft labs because overgrading is lucrative to everyone involved, except for you. Some labs even print a “suggested replacement value” on the report which is high above the price the store intends to charge. Salespeople may present the diamond to shoppers as if it is a great deal. This type of arrangement goes against the purpose of a reputable independent lab, which should be there to protect consumers.
That slippery seller offering an E VS2 Ideal Cut to you at some unreal bargain-price could be ripping you off. Why? Because that diamond will really be graded G SI1 Good Cut by any reputable lab and pros know it. Mr. Slippery bought it on that basis but is presenting it to you as something better, and undercutting all the reputable vendors offering you a true E VS2 Ideal Cut at a fair price. You give the scoundrel your business because his price is lower, thus it seems like he’s doing you a favor. He is not. He is laughing all the way to the bank because you were fooled by a soft “Certificate.”
Overgrading has become institutionalized. EGL International, in particular, has been singled out as a lab guilty of overgrading, and and banned from major trading platforms. You can read more about Overgrading, “Lucky Certs”, Cut Depreciation and Undisclosed Issues on our Avoid Pitfalls page.
GIA and AGSL Grading Reports
The Gemological Institute of America (GIA) and the American Gem Society (AGS) were both founded by Robert Shipley in the 1930s and undisputedly employ the most strict and consistent standards. Diamonds with reports from the AGS or GIA command a higher premium and hold their value better than diamonds from softer labs. The world’s best diamonds are typically sent to these labs.
The Gemological Institute of America (GIA)
has the strongest worldwide reputation for independence and consistency. The world’s largest and most valuable diamonds have been sent there for decades thanks to their constant color and clarity strictness. GIA added a two-dimensional cut grading system for round brilliant diamonds in 2006. While this raised global cut-consciousness, many consider their top grade quite wide, permitting a wide range of visual character and quality. We urge you to read our page: Why GIA Excellent is Not Enough.
The American Gem Society Laboratories (AGS or AGSL)
is the world’s elite cut grading laboratory. Smaller in scope than the GIA, they enforce the same color and clarity standards while focusing more strictly on cut craftsmanship and scientific light performance. From 1996-2005 they employed the only cut-grading system for round diamonds. That two-dimensional system was replaced in 2005 with a three-dimensional light performance metric that works for several diamond shapes including round and princess cut.
Grading Reports and Cut Quality
Most soft labs use unproven systems to assign (typically liberal) grades. The vast majority of grading reports seen in mainstream markets are issued by these labs.
boasts the only cut grading system recognized by the science community. Published by SPIE, the international society for optical engineering, it is the only system that is diamond-specific; evaluating angular spectrum in three-dimensions and takes different distances and tilt into account. Requirements enforced for their top cut grade in polish and symmetry stand above all other lab standards. Fewer than 1 in 20 round diamonds are capable of earning the AGSL Ideal grade, and this number falls to 1 in 100 for princess cuts. Only 2% of all diamonds in the world are sent to the AGSL for grading. Diamonds that cannot succeed there are sent elsewhere.
enjoys a long-standing reputation as the global diamond grading authority. Their cut grading system, introduced in 2006, relies on a two-dimensional proportions system based on human observation studies. Their top grade of “Excellent” is in large agreement with the AGS system, though it is far wider and ranges into a steep/deep area that does not result in high performance. Approximately the best 15% of round diamonds will earn the top grade in the GIA system. Many reputable sellers carry diamonds graded by the GIA. The GIA does not yet grade cut in fancy shapes.
Grading labs can be compared to universities. A diamond manufacturer sends each diamond (student) to the place that diamond will have most success. The most average go off to big universities with common standards (EGL USA, IGI USA). The more elite ones with the ability to score high are sent to the Ivy League (GIA). A few that will be worthy of passing the rigors of rocket-science will go to MIT (AGS). And a few at the bottom of the pile get sent to city college (Joe’s Gem Lab and hot dog stand) or sold with no report at all.
This comparison is meant as humor but there is a parallel logic. The path a diamond takes from cutter to lab to seller is chosen on-purpose, based on a number of factors which include the target market and knowing how well (or not) a diamond will score at one lab vs the next. Diamond professionals know this and can use this proprietary knowledge to protect their clients, or to take advantage of them.
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Get Rich with Diamonds?
Wouldn’t it be great to get rich in diamonds?
Opportunity abounds and fortunes are just waiting to be made!
The diamond business is divided into a few broad areas although there are companies that overlap these various categories and participate in several different areas simultaneously.
As with all other industries, there are basically two avenues for investment. You can invest directly into a company that’s already in the industry or you can create a competitor and take all of the money for yourself.
Here are some basic groupings in the diamond business and some thoughts on the investment potential.
Polished diamonds, Rough Diamonds, Mining company stocks and shares, Manufacture of rough diamonds into cut stones, Diamondtaires ( wholesale to resellers and retailers, retail ) Arbitragers ( wheeler dealers ), Pickers.
Read on for more detail of these specialized terms unique to the diamond trade.
When people think of diamonds, this is usually what is meant; a finished product that is used as a component in jewelry.
Customers have been told for decades that diamonds are an investment and, for the most part, this is simply not true.
Expert knowledge, and years of experience, backed up by formal education is required.
Properly evaluating an investment can only be done after it’s been sold and all the related fees have been paid. This means that all of the initial costs must be considered including purchase prices, taxes, shipping, appraisals, setting, and financing along with all of the selling costs like advertising, commissions, packaging, recertification, fraud, shipping and the like. There are also holding costs like insurance and security that need to be considered. Most consumers find that they make out rather badly when they finally do the accounting (if they ever do the accounting). All of this notwithstanding, there seems to be no shortage of sellers who are anxious to convince you that diamonds are a good place to stash your nest egg. I humbly disagree. Diamonds can be an investment in your relationship, they can be an heirloom for your family, they can be a status symbol or they can just be fun.
These are fine reasons to buy, but don’t go in with the illusion that you will see your money again.
It’s well know that diamonds are plentiful in Africa; they can be sold for a fortune in America and Europe; and that this traffic is dominated by an evil empire called DeBeers Consolidated Mines. Well known or not, this is flatly false. Diamond mining is hard damn work involving lots of people and expensive machinery. It requires a large investment and an extremely long-term vision for return on that investment. DeBeers is, indeed, the largest diamond mining company in the world but they have lots of competitors both large and small. The large ones, like DeBeers and BHP-Billiton, are public companies and their records are public. The records are pretty clear. Big money goes in and the profits are tiny. Some years are better than others. Competition is fierce and the difficulties are numerous. There are traders in every country from Russia to Peru who will help you to buy rough diamonds and import them yourself into the country of your choice without the need to go through the big companies. At home, presumably, you can have them cut into polished diamonds and resell them for big profits on your local market. If you’ve got a market- like you own a jewelry store- this sometimes works out but otherwise forget it. Even then it’s a mixed bag and not for the faint of heart. Rough diamonds is a rough business beset with criminals and thieves. If you lost your life, you would not be the first and if you lost your money you wouldn’t even be unusual.
If there’s not money in buying rough diamonds, how about the mining companies themselves? They must be making money. Not necessarily. As mentioned, DeBeers is not a particularly impressive stock, nor are any of the other mining companies. In 2015, for example, they had the dubious distinction of being the worst performing major stock in the UK. They have had their good years and it’s definitely possible to make some money in the stock market with these guys, but this isn’t usually what investors are thinking. The typical plan is to get a mining claim in Africa somewhere and have a joint venture with a local group that will actually do all of the dirty work in exchange for a share of the diamonds. Sounds good. Never works. You should choose business partners with the same level of care that you use when choosing a spouse. This is especially true if you are relying on your partner to operate the company. In addition, the laws and business environment in Africa are very different than they are in the US and Europe. Entering into a contract in Congo simply does not mean the same thing that a similar contract means in the US does. For investors who are located in the same country as the potential mine and who have experience with the mining business and the partners, this kind of deal is worth considering, otherwise you are pouring your money down a rathole.
This is what jewelers call the cutting industry. These are the companies who convert rough diamonds into polished stones. It’s a very labor-intensive process that involves some pretty exotic skills and unusual equipment. Increasingly it’s being done in low-wage countries with very high-tech tools. They’re making some money here, but not much. Learning to cut yourself is not a very good proposition because you have to compete with everyone else who will do it cheaper and you will have problems with buying rough and with selling polished stones. It makes a pretty good hobby if you’ve got a bunch of time and money to burn, but don’t expect much in the way of return. For manufacturers to make it, they need to buy stones from low-cost providers and sell them quickly after completion in order to keep inventory costs down. Buying right is key and this means big money. As with the mining business, there are a few opportunities here. It’s best if you are a high-level government official in a very low wage country and you have a large bank account in a country with a stable currency. You need the money to buy the rough since the mining companies don’t extend credit and you are planning on hammering them so hard on the price that they won’t be willing to give the slightest additional concession. You need to be highly placed in the government so that you don’t get cheated out of your product at the end, since the low-wage countries tend to be the ones with the most corrupt officials. If it isn’t you, you can bet that you’ll be in the sights of whoever it is.
These are the people who buy diamonds in bulk and sell them at a profit in smaller quantities to other marketplaces. They are very popular in TV shows – usually crime dramas.
It’s not that they have more than their share of criminals; they are generally very respectable people. They’re the victims.
They get robbed, shot, burglarized and generally ripped off at an alarming rate.
As with the above, there is some money to be made here but it’s not easy. The manufacturers are anxious to sell their stones quickly and for cash and consumers would like to be extremely selective about who they buy from.
This leaves some room for an entrepreneur who is willing to get in the middle.
Everybody wins. If you want to get into this business, it’s essential that you personally become an expert. Most of your competitors grew up in the business and learned the details of the diamond trade at a very early age.
Their whole family is in the business. You will need to make snap decisions about buying and selling and be prepared to commit serious money over a handshake deal.
Be prepared to invest millions of dollars in inventory and learn all you can about alarm systems, firearms, and similar security procedures.
Bankrolling a diamondtaire may be a possibility as well, if you happen to know one well enough to make what amounts to an unsecured million dollar loan.
I love that word. They are guys who buy something in one market where something is undervalued and sell it in another market where it’s worth more. Sort of like buying Manhattan for $28 worth of beads. As with all of the above, there’s some money to be had here and, as with the above, it isn’t easy. Buying in Belgium and selling in the US seems to be a popular version. For some reason, people seem to think that Belgian traders who have accumulated millions of dollars in diamonds would rather sell them cheaply in Antwerp than to go through the trouble of flying to the US and selling them there. Maybe they can’t afford the ticket or they’re not getting along with their brother-in-law who lives there. There are similar versions about buying in New York City and taking them to the Midwest for big profits because, presumably, those guys on 47th street can’t figure out how to sell their stones in Colorado or that jewelers in Kansas haven’t heard of the internet. It’s all nonsense. A FedEx Pak from Belgium to Denver costs $35 and takes 2 days. Sure, there’s a savings to be had here, and if you buy enough stones you will even save up enough to buy a trip to Belgium, but this isn’t the key to your retirement.
This is the end of the food chain in the diamond business. These are people who go to pawn shops, flea markets, garage sales, craigslist and similar markets and look for good deals. Occasionally they can make out pretty well if the seller doesn’t know what they have or they are otherwise in a pinch. The first requirement here is to learn how to spot a treasure when you see one through a dirty glass showcase and to do this without tipping your hand about what you count as interesting. Learn to work fast because you’ve got lots and lots of competition and make deals that leave everybody happy so that you can come back to the same store next week and have them happy to see you. Don’t get greedy. The second requirement is to have a sales outlet. If you don’t own a jewelry store, pawn shop, website or some other avenue that’s pretty good at moving your treasures, then you’re a collector, not a merchant. There’s nothing wrong with that, but the subject here is how to make money in the diamond business and building up a personal collection hardly qualifies.
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It's amazing that this wasn't listed as one of the basic 4 C's since it is the one thing that absolutely EVERY customer asks about and it even happens to start with 'C'. Here is a brief primer on how diamonds are priced:
Usually, diamonds are sold separately from the mounting. This suits both the customers and the dealers. For the customers, this makes it possible to examine the stone without anything being obscured by prongs and without the distractions supplied by the ring. For the dealer this allows them to sell the customer exactly what they want while maintaining a reasonable inventory.
Diamonds are usually sold by weight. When the dealers buy them, they are ALWAYS sold by weight and you can bet that the price you are being charged more or less is based on the price that they paid. 1.75ct. stone will be described as $7,500/carat (if this didn't make sense to you, it's because you started the intro to diamond grading with the Cost button. Feel free to read further or go back and read up on weight, clarity, color, and cut). The final price for this stone will be $7,500 x 1.75 = $13,125.00.
Basically, the cost per carat will go up as each of the important characteristics gets better, and go down as they get lower. Often these changes are quite dramatic. All other things being equal, a 2 carat stone will be about 4 times the price of a 1 carat stone with the same clarity, color and cut. This is why stores like to advertise 'total weight' of their merchandise.
Many dealers start their pricing procedures using a document called the Rapaport report or one of the several competitive documents in the industry. This is a pricing sheet that relates weight, clarity, and color to produce a price. Unfortunately, the Rapaport diamond report (or Rap for short) isn't nearly as useful as many people wish it was because it glosses over cut as well as availability issues. Rap prices can vary from reality by as much as double (or half) of the appropriate price. Buying strictly off of Rap is kind of like using the Kelly blue book value for a car without paying attention to the condition of the vehicle.
Wholesale Diamonds to the public- largely a marketing ploy.
Noun: The selling of goods to merchants; usually in large quantities for resale to consumers.
Noun: The selling of goods to consumers; usually in small quantities and not for resale
Wholesale Diamonds are not sold singly, they are sold in parcels.
For starters, let’s assume that your interest in reading this article is because you are a consumer interested in buying a small number of diamonds and that they will not be for resale. That is to say, the potential transaction involving you is retail. It’s always possible that they occasionally also sell to other customers in large quantity for resale. Not that this has anything to do with you but it would allow them to accurately call themselves wholesalers, at least occasionally, so let’s move on.
Here’s how the wholesale diamond business really works:
There is a standard practice called memorandum or ‘memo’. This is a consignment arrangement between a wholesale diamond merchant and a retailer where the retailer can show you stones that are actually owned by someone else and that they have borrowed for the purpose of showing to you. If you buy a memoed stone, the store will then give the money to the wholesaler, less the store’s share and the entire deal goes through. If you don’t buy, they return the stone to the wholesaler who then tries to sell it somewhere else. This gets repeated for as long as it takes. Eventually,it will find a home.
This system has lasted for decades because it works to the benefit of both dealers. For the retailer, they have access to a virtual inventory that is enormous and this allows them to get exactly what the client wants without the expenses associated with carrying a large inventory. For the wholesaler, they get to share their inventory across many stores and many different markets. They can end up making sales to customers that are dispersed throughout the country, or even worldwide and who have a huge variety of different shopping preferences ranging from discount websites to pawn shops to exclusive designer stores. Because of the speed of selling they can afford to carry in inventory unusual items that may take an individual store years to sell but by sharing it between many stores they can get their money out in a reasonable amount of time. It’s a very synergistic arrangement.
No sensible dealer, storefront or otherwise, will knowingly buy from a ‘wholesaler’ who is directly competing with them for customers. It just doesn’t make sense. It costs them customers, it costs them money and there are way too many alternative sources available for them to need to put up with it. It’s downright self-destructive. This means that your self described ‘wholesaler’ probably isn’t doing much wholesale business, if any at all. Not that it even matters all that much. Pay attention the deal at hand
Claims of wholesale-to-the-public have become so common in the industry that even some high-quality jewelers are doing it. This is especially true of online vendors. It’s simply expected by the customers and the ones that avoid it are seen as somehow inferior. Don’t put much stake in it. Examine each stone on it’s own merits. If the dealer has added value to the deal with things like financing, guarantees,and convenience they will probably charge a little more. If they are a discount, stripped-down sort of operation, they may be a little cheaper. If you have a good idea of what you find important it’s easy to evaluate each deal for it’s own strengths and weaknesses no matter how the dealer chooses to describe themselves.
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Synthetic, Lab-Grown and Man-Made Diamonds…
The above are all terms for diamonds grown with specialized laboratory equipment which simulates the intense heat and pressure in the earth which caused natural diamonds to form. Synthetic diamonds are chemically same as those obtained through mining. The first man made diamonds were produced in the 1950’s but gem diamonds cost more to make than mined ones. For many years it was beyond the scope of technology to create colorless synthetic diamonds, but today’s technology and equipment has made it possible. Detection is extremely difficult for the average gemologist and requires specialized laboratory equipment.
Simulants like CZ are not Synthetic Diamonds
Gemstones that simulate diamonds, such as cubic zirconia and silicon carbide or moissanite, do not have the same properties as natural or synthetic diamonds, nor are they actually carbon crystals. As the same implies, they “simulate” what a diamond looks like, but are not actually diamonds. Synthetic diamonds, chemically and technically, are in fact diamonds. They were just pressed in a lab over a few months’ time or made in high tech microwave ovens, not naturally formed in the earth hundreds of millions of years ago.
Do Synthetics Cost Less
The cost-basis of colourless synthetic diamonds is still relatively high, coming close to 70% of the cost of mining and bringing natural diamonds to market. Fancy yellow colored diamonds can be made more cheaply than colorless diamonds, and they cost more than colorless diamonds – but there is less demand. There are also extreme controls exercised by labs and industry authorities regarding disclosure and promotions. This means synthetics must be marketed on distinctly different grading reports and loudly proclaimed as man-made-diamonds (MMDs) in a manner that a majority of consumers so-far appears to find off-putting. Market reviews by Bain Co and others have suggested that until lab grown diamonds can be produced for less than half the price of mined diamonds there will not be enough demand. However some people are attracted to the idea of man made diamonds as opposed to mined diamonds for environmental or other reasons.
Are My Diamonds Natural?
The trade-at-large has been careful to compartmentalize every step, from lab-diamond-growth to market, in order to create clear separation of Synthetics, aka MMDs, from those with natural origins. Only a small number of companies currently produce synthetics and their output is closely monitored. For now these diamonds serve only a niche market, due to the stigma surrounding the product, and possibly the cost-basis still being close to diamonds of natural origins. There is no doubt that the eco-friendly and “no-conflict” aspects have appeal, and as technology improves we may see a rise in consumer buy-in.
The larger buzz has been the possibility of “sneaking” these diamonds into the market as natural. The world’s major labs are constantly scrutinizing submissions, but the main disclosure concern has regarded melee, or tiny diamonds, which are traded with less involvement and oversight from the major labs. Everyone from mining-houses to labs to bourses/dealer’s-clubs is vigilant, as disruption in disclosure is seen as a potential consumer-confidence nightmare.
Check Your Grading Report
The world’s major grading labs either reject synthetic diamonds, or require them to be reported on distinctly different documents.
This GIA Synthetic Diamond Grading Report is one such example.
Know Your Jeweler
The best protection for consumers comes from reputable business entities doing business with long-standing reputable suppliers they know to be vigilant and capable of protecting natural supply. As with conflict-free, reputable reporting and gemological standards, the best jewelry retailers serve as agents and guardians for their clients, acting on their behalf with expertise, experience and strong internal relationships.
Call our appraiser today at (303)223-4944 for an appointment or inquire right now by email.