How diamond prices are determined...

Pricing most products is quite straightforward. Determine how much it costs to make the item, how much it costs to market that item, and then mark it up by 15 – 30% or more.

Simple, right? Well, pricing diamonds isn’t quite that simple. There are many factors that must be considered when diamonds are priced.

Diamond prices are determined by first adding the cost of mining and sorting the rough diamond, the cost of cutting the diamond, and all other costs necessary to turn the rough stone into a marketable diamond. Depending on the importance of the diamond, an independent company may be called in to certify the grade of the diamond based on the Four Cs: carat, color, clarity, and cut.

At this point, the diamond becomes more expensive each time it changes hands, until it finally reaches a retailer, where the price is raised a bit more.

Before reaching the retailer, however, the diamond must travel from the mine, to the cutter and polisher, to the independent grading company, and then to the primary market.

Once it has reached the primary market, it will be purchased by diamond dealers and wholesalers, and from there it will be sold to retailers.

As you can see, the earlier in the process that you can purchase a diamond, the lower the cost of the diamond will be – but not the value. The value is based on what the diamond will sell for in the market place through a retailer.

Useful tips

• If you own a diamond, and you have no idea how much it is worth, you can have it appraised, but the appraisal may not be accurate. You will be better off obtaining a certificate through the Gemological Institute of America (GIA). With the information on this certificate, you can use a cutter’s guide to accurately determine what your diamond is worth.
• Use the information on the diamond certificate to look up the price in one of the guides that the diamond cutting industry uses. This will give you the most accurate value of the diamond in your possession or of the diamond you are considering purchasing.
• There are also many diamond price calculators available on the internet, and many diamond dealers use these as well. You must realize, however, that before you can accurately price a diamond without a diamond Grade Report, you need to know quite a bit about diamond basics, such as the Four Cs – and how each of those aspects adds to the value of a diamond (or decreases the value of the diamond, as the case may be).