What Determines The Price Of a Diamond?

What Determines The Price Of a Diamond?

People ask us all the time why the Ethica Diamond gemstones are so much cheaper than mined diamonds. And why they’re so much cheaper than lab-grown diamonds.

It’s a really good question, and the answer says more about why mined diamonds are so expensive than why ours are not. There are diamonds in this hole in the ground, and once you shape them, and polish them, they become the sparkly gems you recognise in jewellery. They take a lot of work to get them to this quality though. Gold was popular in the time of the pharaohs, and before, and diamonds have been in use in jewellery for centuries, but they only really came to prominence in the 20th century.

Diamond Mine

For that, you can thank De Beers. They are a diamond cartel, owning diamond mines and processing works as well as huge stockpiles of diamonds, across the world. They very carefully bought up the mines (owning 90% of the industry in the 1990s), and have been managing the supply to create the illusion of scarcity ever since. Of course, managing demand goes hand in hand with that, too. Enter one very clever marketing campaign.

Old marketing campaign advertising “A diamond is forever”

Old marketing campaign advertising "A diamond is forever"

You’ve probably heard ‘diamonds are forever’ slogan, well, that was the line that ad agency NW Ayer came up with in 1947, to market De Beers’ diamonds as engagement rings.

The idea behind the De Beers scheme was to encourage people to purchase diamonds as luxury items, and boy did it work! The belief that diamonds are valuable and scarce dates from this period, as does the prevalence of diamonds in engagement rings. Even now, diamonds are expensive, compared to other gemstones of comparable size, and are associated with luxury and getting engaged.

The thing is, diamonds are not valuable, per se, just expensive. The pricing of diamonds is very carefully regulated, controlled and monitored to protect the diamond producers. The actual prices that diamonds are sold for come from the Rapaport Diamond Report, administered by their trading network RapNet.

This is what they say, on their website – “The Rapaport Price List is the international benchmark used by dealers to establish diamond prices in all the major markets.”

This is a screenshot of the RapNet pricing tables for a week in June 2010.

This is a screenshot of the RapNet pricing tables for a week in June 2010.

The price list is a series of tables that give a per-carat price for diamonds of different clarity and colour, with higher prices being attributed to larger, whiter and more-flawless gems. Read more about the 4 C's on our Diamond Buying Guide.

These prices give the ‘new’ price, and the replacement value. If you attempt to sell a diamond second hand, you will quickly discover that the re-sale value is considerably less.

Prices for lab-grown diamonds are also allocated on the Rapaport price sheet, with a deduction of around 30%. Lab-grown diamonds that are certified by the IGI (International Gemological Institute) or GIA (Gemology Institute of America) are always priced according to the RapNet price structure, which means that most lab-grown diamonds are tied to the system that protects the interests of the diamond mining conglomerates.

Colour and CLarity

Our Ethica Diamond® gemstones are independently certified, by the GRI or IGI, which means they can be independently priced as well.

We set the prices for our Ethica stones according to the cost of production and bringing them to the customer, as with a regular commodity. This is why the Ethica Diamond gemstone retails for around 90% less than an equivalent mined diamond, and are also cheaper than lab-grown diamonds.

Our ethical credentials are the cornerstone of our business, and we believe that pricing our diamonds should be a part of this. We believe that you, the customer, deserve jewellery that is ethically sound, environmentally faultless, and fairly priced, and we are committed to offering that to you. Find out more on Our Stones page or our Environmental Ethos.

STONE shapes

Sources:

http://www.thedrum.com/news/2016/03/31/1948-de-beers-diamond-forever-campaign-invents-the-modern-day-engagement-ring

http://www.diamonds.net/

Engagement Ring Buying Guide
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