In my last post I talked about the macroeconomics of diamond pricing, and how pricing today is based purely on supply and demand.
The question then is how does this translate on a micro level for someone buying a polished diamond? How do they know what they are getting or paying? While it may sound complicated, knowing what you are getting in the 21st century is actually really simple.
Diamond Value Measurements
Diamonds have four measures to determine value. They are:
quality of their cut.
The modern standards of measurement for color and clarity were developed by the Gemological Institute of America (GIA), in the 1930s. Cut was only fully defined by GIA in 2005.
The GIA is a non-profit populated by scientists whose interest was in objectively defining gemstones. The first measure, color, was broken down into an alphabetical scale with D being the first color then E going on down the alphabet. The GIA, being objective , started at D and not A because they knew that there is no best color, just a scale and so didn’t start at A which they felt would imply the first color on the scale was somehow best.
Purity starts at flawless and goes through grades of VVS, VS, SI on until you get to I1, at which point inclusions start to become visible to the naked eye.
From a consumer perspective this means that there are seven purity grades from flawless before an inclusion is possibly eye visible at I1. In terms of color, there are also 6-7 grades going down the scale from D to I or J before you might start to see a yellowish or brownish tinge.
Cut refers to the standard of precision and angles used when polishing the diamond. Cut is probably the single most important factor in a diamond’s beauty and a major determination of value. A diamond is a crystal prism which reflects and refracts light, yielding what we may call sparkle. Each facet is responsible for this so facet precision and angles are critical to achieve superior beauty. In 2005 GIA defined an objective set of measures for cut, and a cut grade, the best being triple excellent. In the 20th century cutting technology and measuring tools for this standard of precision were not readily available.
When looking for a great diamond, first look to see whether it has a GIA certificate. There are other laboratories out there, and while they all use the now universal GIA terminology, not all use the same standards. Another labs G color may not be the same color as a GIA G, the same applies to all measures. To me, GIA is the standard.
You also need to make sure that the diamond has a GIA triple excellent cut grade, and no other factors like significant fluorescence. When it comes to cut grade, it’s not just about sparkle, a non-triple excellent cut grade is an unknown value variable. You’ll pay a little more for a triple excellent cut, but it will hold and appreciate its value in a way others are unlikely to and it will simply look more beautiful.
Assuming you are looking at GIA triple excellent, what should you buy and what do you pay?
Many people have a size in mind, say 1 carat, so pick a diamond (GIA triple excellent) in the size you want that meets your budget, as long as it is D-I color and purity above I1 you are all set and wont go wrong.
As for pricing, you can buy a diamond set in jewelry at a retailer. The retailer is going to have added in their design costs, their overheads, the cost of the jewelry etc. The other alternative is to buy an unset diamond from an online site; this can be up to 50% less. Online you can do price comparisons quite easily.
Be very careful when shopping online to compare apples with apples since a diamond site may have various types of laboratory certificates, and even if its GIA make sure its triple excellent of cut grade. Looking at GIA graded diamonds that are all triple excellent cut grade and not having significant fluorescence means you are comparing apples with apples.
Finally, while we all want the lowest price, we also want the best price. A few percent more on a purchase for something that can appreciate 5% or more per year is well worth it for value and beauty.
The lesser graded diamond won’t appreciate as well, won’t sparkle as nicely, and if ever there is a resale will fetch a lower price. No-one ever regrets buying quality.
Sean Cohen is the president of Van Zwam, the home of Defined Value Diamonds (DVDs), an easy to understand, simple and effective diamond investment program. He is the former president and co-founder of, NHC LLC and BWHC LLC a series of joint ventures with Tiffany & Company, President of Rand Diamond, VanZwam LLC, SSC Management, and past President of the International Diamond Manufacturers Association.