Determining Diamond Prices & Value: Comparison, Statistics, Education

While the price of a specific diamond revolves around its size and quality – the diamond 4C’s -diamond prices in general are determined largely by supply and demand, with some interesting additional factors at play. In this article we will discuss the large and small factors that diamond shoppers should consider in order to understand diamond prices.

*Learn about lab diamond pricing here.

Diamonds are a global resource with commercially viable mining sources ranging from South America to Africa and from Siberia to Canada. Australia is now a major producer as well. And gem diamonds are in demand in developed countries worldwide. Until fairly recently the supply of diamonds to the market was primarily under the control of one company, DeBeers. The same company was also the biggest promoter of diamonds to the public. This led to a somewhat monopolistic and artificial market. DeBeers could release and withhold diamonds on the market and thereby steer diamond prices.

Today, most of the global production is outside the control of DeBeers and the marketplace has become more organic with competition determining diamond price to a greater extent than ever before. Still, there are relatively few diamond mines and mining entities and their interests are closely aligned. Therefore, prices are still not determined entirely by supply and demand factors. It is not necessarily in any producer’s interest to lower prices significantly. Rather, a mining company which owns a resource with the potential to extract a large quantity of diamonds from the ground may instead elect to slow down production when the market is not strong and ramp up production when diamond price is high. However, there is good reason to believe the supply of mined diamonds will decrease over time as more mines are being depleted beyond commercial viability and few new sources are being discovered or developed. Large scale diamond mining is extremely expensive.

The global nature of the diamond market today has also increased price volatility. Where the US market was once the dominant driver of demand for diamonds, emerging markets in China and India in particular, have become much more important in recent years. As these economies heat up and cool down, the uneven demand is driving fluctuations in diamond prices. We have seen the job market, credit markets, and other major market forces having significant impacts on diamond prices, both up and down, over the past decade.

Another interesting factor that is very much in play in moving the diamond market is the effect of a wholesale pricing guide that has been adopted by diamond dealers all over the world. The Rapaport Price List contains diamond price estimates that are presumably derived from research of actual asking prices at the wholesale level. A diamond price chart is published on a weekly basis and manufacturers, dealers, and jewelers all over the world use this information to guide their buying practices and their selling prices. When “the Rap list” changes, diamond prices all over the world are immediately affected. Because of the power of one company to impact global markets with this publication, many believe that it creates artificial valuation in certain cases. For instance, some diamond manufacturers are not able to profitably cut certain shapes, sizes and qualities because they cannot be traded profitably as a result of low list prices. Instead they turn production to areas where the list is higher. In this way the publishing of these lists impacts not only trading prices, but supply as well.

Access to the Rap list requires a subscription and a trade account. Sometimes dealers will freely share this information with consumers, although they are prohibited from publishing the information by the terms of their subscription.

The rap list is series of tables broken down by shape and size range. Actually there are only two shapes that matter- the round list and the pear list. All non-round or ‘fancy shape’ diamonds are judged using the pear list. Each size range table is further broken out by color and clarity. The price at the intersection of a given color and clarity is the operative baseline per carat wholesale price (expressed in $100’s of dollars) . However, as strange as it seems, diamonds are usually not actually traded at these prices. They are generally traded at a “discount” to rap. The discount is expressed in the diamond trade as a percentage “back of rap” or “off rap”.

For example, a 1.00 ct G VS1 might be listed at $8,600 per carat. If the asking price is $6,880 (10% lower than list), it would be said to be ’10 back’. Some sizes, colors and clarities such as fine larger diamonds often trade at a premium to rap. A diamond trading for 10% greater than list price might be said to be ‘Plus 10’. Diamond dealers generally talk in terms of percentage of rap rather than in total dollar amounts, leaving the final price to the mathematical calculation. For instance, the price for a 1.07 G VS1 might be quoted as simply ’10 back’. Upon agreement of the price the purchaser would then be billed 1.07 X [.90 X 8600 (list)] = $8,281.

The information about diamond pricing presented in the rap list is only as good as the grading of the diamond in the first place. Second tier labs with questionable grading practices or unreliable accuracy will defeat any meaningful attempts to get a fix on the true value of a diamond. GIA and AGS certificates can be relied upon. Demonstrating the power of a report from AGS Laboratories, Rapaport’s own surveys diamonds show AGS reports actually trade higher than GIA reports on the Rapaport trading network. The graph below was part of a presentation by the founder and CEO Martin Rapaport to the annual gathering of trade members at the JCK convention in Las Vegas. Labs such as HRD and IGI are traded at lower prices than GIA. In 2015 Rapaport banned EGL affiliated labs from the Rapnet Trading Network because of extreme over-grading.

Until recently the biggest factor NOT contained in most lab reports was overall Cut Quality. That may come as a surprise considering that cut quality is widely considered the most important of the diamond 4C’s! But until 2005 GIA did not report overall cut quality on any diamonds they graded. That year, they released their cut grade system for round diamonds. Rounds are still today the only shape that GIA attaches an overall cut grade to.

AGS began offering cut grading in 1996, and in 2005 released their Light Performance Cut Grading system. This system is the strictest and most scientifically rigorous system in the market today, and is available for rounds as well as princess cuts and several other fancy shapes.

Rap discounts (or premiums) can vary greatly depending on the cut quality of the diamond. Without knowing the quality of the cut, it would be impossible to determine an accurate value of a given diamond based upon the rap list, even when knowing its size, and an accurate color and clarity grades.

And because the GIA system is relatively broad, even their top cut grade of Excellent will contain a wide range, some more valuable than others.

Consumers are well advised to be wary of any merchant using the rap list to demonstrate that a diamond under consideration is a good deal. As you will see below, there are many important value factors that impact value that cannot be gleaned from a grid that is limited to size, color and clarity, even if accurately graded by a top tier lab report.

Consumers should also be wary of any merchant claiming to be selling at wholesale prices, a very common practice in the jewelry industry. This is typically a false illusion that merchants are attempting to create in order to make a sale.

Diamonds should be evaluated on the basis of their particular attributes and characteristics and compared against like kind and quality on the open market. In addition to gemological quality, prices should be considered in light of any associated benefits that may be included in the purchase.

As diamond size increases for a particular quality, so does rarity and price. Prices actually increase at an accelerating rate with increases in size, compounding the total price for larger stones. For example a 2.00ct diamond might be 3 or 4 times the total price of a 1.00 ct diamond of the same quality- not just double. Using the G VS1 example again, a 1.00 ct lists for $8,600/ct whereas a 2.00ct is $12,800/ct or $25,600 total, nearly 3 times the cost of the 1.00ct.

The size relationship is a continuum, but one that has a number of psychological points along the line that are referred to as “magic marks” where prices tend to jump significantly. The 1.00ct mark is probably the best known. A 1.00ct diamond of a given quality might be significantly more expensive than the same quality weighing 0.98 with no discernible visual difference. Many shoppers try to take advantage of this fact by looking specifically for diamonds just under these magic marks. Some of the most important ones are .50ct, .70, 1.00, 1.50, 2.00, 3.00, and 5.00.

In the Round Rap list chart above you can see for example that a G VS1 from .90 to .99ct is listed at $6,700/ct while the list price for 1.00-1.49ct is $8,600. Therefore the difference in list price between a diamond of .99ct and 1.00 would be a whopping $1900. It should be mentioned here that the market itself softens some of these jumps through variable discounting practices. For instance, the trading price for the 1.00 above might be 20 back of list whereas the .99 ct might be priced at only 10 % back. Doing that math still makes the .99ct around $800 less expensive. When there is considerable price differential between two diamonds just above and just below a magic mark, many people would prefer to forego the psychological benefit in return for substantial savings!

Clarity grades represent ranges on a continuum as well, and those ranges increase in size as clarity grade drops. For instance, in the Slightly Included grades (Si1 and Si2) the range of possibilities is much broader than in the VVS grades. Si clarity can include diamonds that have inclusions visible to the naked eye or that have inclusions of a nature that make the diamond hazy. Other diamonds in the Si range can have inclusions that are well camouflaged within the facet patterns or located at the girdle and can be completely covered by a prong, and cause no problem for transparency. Two diamonds with the very same clarity grade may therefore be price much differently based upon factors not evident to the average consumer.

In larger diamonds (1.50ct and up) VS2 clarities also frequently contain inclusions that are visible to the naked eye. Prices of these stones can vary widely, particularly per carat prices escalate significantly with size.

About a third of gem diamonds possess a characteristic known as fluorescence. These diamonds glow when in the presence of strong ultraviolet light. The most common color is blue, although other colors are possible, and strength can vary from faint to very strong.

Fluoresce can have a significant negative impact on price, and is therefore a factor that must be understood in order to judge the value of an individual diamond. Fluorescence does not affect all diamond qualities equally. It tends to have more deleterious effects on the price of higher end diamonds, particularly colorless stones.

Because of their added complexity, fancy shape diamonds vary more widely in price when comparing like size and quality. Length to width ratios can change the outline of the diamond giving it a more or less pleasing shape which impacts salability and therefore asking price. Fancy shapes also have more variety in faceting styles which can likewise alter their appearance and marketability, even when size, length to width ratio, color and clarity are the same.

With fancy shape diamonds, their particular ‘flavor’ or aesthetic value can dramatically impact price, which renders a simple tool like the rap list very limited in value.

Rounds are by far the most popular because of tradition and because of their potential for maximum brilliance if cut with precision. But fancies are priced lower than rounds, so shoppers looking to get more carat for the dollar might consider a fancy shape. Princess cuts for instance can be significantly less expensive than rounds of comparable size and quality. Ideal cut princess display light performance at the top of the scale for fancies.

To illustrate the difference in list price, you can compare the round list for 1.00-1.49 for a G VS1 at $8600/ct to the same size and quality in a princess which lists at $6,700 on the pear list below. That’s a difference of $1900 making the princess at least 30% less expensive than a comparable quality round. The savings can even be greater than that as princess cuts also trade for deeper discounts off Rap.

Many merchants today sell from a “virtual inventory”. That is, they do not own or even possess the diamonds they offer. They are actually the inventories of the dealers whose listings they present. Many companies today stock few, if any, of their own diamonds.

The benefit of this arrangement is that low prices can be offered. The merchant has no capital investment or carrying costs. But there are important downsides for the consumer in this business model.

The first is deliverability. The same virtual listing may be posted to dozens of websites. The diamond is therefore unavailable to all but one of those companies. It is common for these diamonds to be housed overseas, so there may be delays in delivery. And when delivered, there may be a problem with the diamond that was unknown by the merchant because they are selling inventory they have never actually seen. This is a particular risk for a consumer dealing with a ‘drop shipper’ who does not perform their own gemological evaluation of the diamond.

Some companies selling virtual diamonds simply clone lists and have no relationship with the owner and therefore no real access to the diamond. Often these companies list the diamonds at artificially low prices. Their strategy is to use deceptive listings as “bait” and then to switch the customer to a different diamond they do have access to.

And it should be remembered that virtual databases contain the diamonds that have been rejected for one reason or another by the companies that do invest in their own carefully selected inventories. This is another reason that virtual diamonds may be priced lower. In fact, many of the higher end diamonds, such as precision cut branded diamonds, go directly from the manufacturer to the specialty retailer, completely bypassing the virtual market. This is one of the reasons that AGS Ideals are in such limited supply in the virtual space.

Most companies today make use of virtual inventories in order to present a wider selection to their customers. Many merchants do perform some type of evaluation before shipping on to their customers. If all goes well and it is done right, it can be beneficial to the consumer.

Some merchants produce and or stock their own exclusive in-house inventories. These diamonds have guaranteed deliverability, are evaluated up front with all available diagnostics provided. The diamonds can be viewed in real time by experts at the company and special imaging can even be arranged. The diamonds can be physically inspected by the consumer prior to purchase at their store or showroom.

In-house diamonds therefore offer the maximum level of certainty about all aspects of the transaction and quality of the item. Investing in, stocking, and vetting of the diamonds involves costs on the part of the merchant which factor into the selling prices. As a consumer you have to decide if the premium paid for these benefits is a value to you.

The final selling price of a diamond is based upon a number of factors including merchant’s cost, the mark-up required for the merchant’s business model, the specific characteristics of the diamond, and any value added benefits, safeguards, or guarantees.

The latter factor is often overlooked in the calculation, but is very important to consider. It is possible to buy diamonds online for seemingly low prices, but those diamonds may come with minimal added value, and may even lack critical safeguards that put your purchase at risk. At a minimum, a verifiable return privilege must be offered or you are simply walking the high wire without a net. You will need enough time to receive, inspect and get an independent expert opinion before the return privilege expires.

Beyond that there are many assurances and benefits that merchants offer that can make your transaction a much more confident one. Information is number one. The diamond should come with the original lab certificate from a top tier lab such as AGS or GIA. Additional diagnostics not included on the certificate are extremely helpful, such as Ideal Scope and ASET images. Hearts and Arrows images are very informative regarding the faceting precision of round diamonds, and should be insisted upon if the merchant is representing the diamond as Hearts and Arrows. These diagnostics require time, effort and skill to provide and therefore add cost. But the value they represent in terms of knowing your product can be significant. They can also prove very helpful in establishing specific quality parameters for insurance policies, insuring that any claim that you may have in the future will be faithfully replaced with like kind and quality.

Buy-Back and Trade-Up guarantees add value. The ability to sell your diamond for a fair price if you should need to is a potentially valuable benefit that could be worth hundreds or thousands of dollars in certain circumstances. The ability to ‘grow’ your diamond in size or quality is another benefit that can be extremely valuable at some point in the future. As tastes change and buying power increases over time, it can be worth a great deal of money in the long run to have a guarantee of full stored value in your original purchase. Such guarantees represent a liability for the company offering them and come at a cost. You have to decide for yourself how much they are worth, but having that option can eventually save you a great deal of money and open up worthwhile opportunities down the line.

There are a number of “branded” diamond cuts on the market, including *Hearts on Fire®, **The Leo Diamond®, ***Solasfera, and A CUT ABOVE® Super Ideal Diamonds. A branded diamond can be a patented facet arrangement or a diamond that represents a unique set of qualities or characteristics. As mentioned in regard to in-house versus virtual diamonds, branded cuts are generally produced in programs with top manufacturers. These diamonds are cut to a specified range of parameters. The quality and consistency of the craftsmanship is often much higher than similar goods in the broader market – the pool from which virtual inventories are drawn.

A branded diamond usually has a particular value proposition and is offered for a premium. The value proposition may involve exclusivity, high-level craftsmanship and light performance, ownership benefits, or a combination. A consumer must decide if the added value is worth whatever premium is being charged, and that can be an individual decision. Unfortunately, not all diamond brands publish their specifications and qualifications or document the performance claims they make, leaving the consumer to take a leap of faith.

But one general benefit involves jewelry insurance. If your personal jewelry policy lists a branded cut, then any claim you would make would entitle you to replacement with that brand if available.

There is a special term used in the trade in reference to microscopically clean and colorless diamonds. These “collection quality” diamonds are the best of the best in terms of color and clarity and they sell for elevated premiums if they are well cut. If they are ideal or super ideal cut, they are truly elite. A clean, colorless diamond with cut quality that fully optimizes for light performance results in a diamond of the utmost beauty. In fact, diamonds simply cannot get any more beautiful.

Ideal cut, collection quality diamonds are the “Holy Grail” for shoppers determined to get the ultimate in diamond beauty and willing to pay the premium.

With the many factors that go into determining diamond prices and value, it is reassuring that today’s consumer has a much easier task of acquiring the needed information. There is a very competitive e-commerce market for diamond sales to the end user, with thousands of companies vying for that business. Many of these companies post diamonds for sale online enabling quick diamond price comparison. Because many companies today are harnessing information technologies to reduce their overhead, many of these diamonds are posted at prices fractionally above wholesale. By conveniently shopping around online, consumers can develop a very good sense of competitive value.

Astute shoppers who spend some time doing diamond price comparison online can find certain areas where their purchasing power can be maximized. Remember that Cut Quality makes a huge difference in both the beauty and value of diamonds. To get an accurate feel for the differences in value it is helpful to compare like size and quality in certified ideal cut diamonds. And don’t forget to factor in added value benefits and assurances!

*Hearts on Fire® is a registered trademark of Chow Tai Fook

**The Leo Diamond® is a registered trademark of Leo Schachter Diamonds

***Solasfera® is a registered trademark of Light Masters Diamond Group