Diamond prices are continuing to rise though they have slowed their pace since June 1st. The best guess is that unless there are new mines or bigger finds of material the increase will continue. Though at a slower pace than we’ve seen in the last few months. The part of the increase that is for finer makes (better cut diamonds) may provide opportunity later when cutting again equalizes with the demand. Right now fine-cut stones with no problems are sometimes sold with a premium. My trips to Antwerp provide less of a break in price than they have. However it seems even more important to go as there is much less aggravation there where I can eliminate stones with issues on the spot ( rather than shipping stones back and forth with hopes of finding something acceptable). I have looked through as many as 200 diamonds to choose five.
One way to look at what is happening is to take it as “supply” price increases. Looking at it that simply really does not tell the story in any clear way. It assumes that all of the increase is due to one cause and there is one method to measure the increases. Demand has an equal or even stronger role in most commodities. The huge demand increase in China and India are driving prices up even as demand in the U.S. is falling.
Lets look deeper. First allow that there is no one price or cost for anyone. Each stone is an individual and sorting them into like kinds for cutting is only an approximate measure. Also since there is no longer one large distribution point (DeBeers), individual mine costs are not bundled or averaged any more. The greatly more expensive to mine Canadian diamonds put the mines in bankruptcy in the 90′s. Today with large consortiums now owning most of the worlds mines (including the Canadian mines) little averaging is being done at the rough level .
Cutters also have changed to meet demand. The were no price increases on cut diamonds between 2007 and late 2010 but there were
numerous increases in the cost of rough material from the mines. In fact several cutters went out of business because of the already tight margins disappearing. One of the ways they deal with price resistance is to cut larger stones from the material. In the past to do this, they cut shapes that would allow for less waste such as pear-shapes and marquise but these shapes remained in disfavor and consumers wanted what looked like a deal. This time they are allowing more problem stones to be sold to unaware jewelers and the public. I had a cutter tell me he had to cut this one diamond to a fine cut but it had an exposed crystal (what in wood would be called a loose knot) near the culet (the bottom point of a cut diamond). He said two years ago this would have been cut to a ¾ct not a one carat. He said “I have to live with this. I think about the person who will wear it someday.” He said it used to be a person marked the diamonds now they are marked by computers which only care about the laboratory report and the money. There has also been an explosion of new cuts but few of these are for adding beauty mostly they are for adding weight.
Brokers and retailers also have had to change to the fact of increased cost while feeling strong price resistance. Brokers can bundle sales when they know a jeweler needs a certain stone. “I can give you a better price if you buy a couple.” They can also hedge
by using a different laboratory report which has different standards. Price range offers from vendors can range up to 40% depending on the
laboratory which wrote the report. Jewelers also can use these tactics but also they could use lower quality side diamonds or promote smaller center stones. Several stores are selling total weight rings where the exact weight of the center diamond is undisclosed. Since price jumps are at certain weight points such as a half a carat at .50ct where an average grade stone will have a difference in price between a .49ct and a .50ct of $300.00. It is legal in many states to post what you call a half carat as well so your half could be from .46 to .55 if you display that information in the store. The odds of getting a .55 is not very good however.
To know and trust what you are buying today you really cannot buy by looking at a piece of paper or a computer screen. You have to find someone who knows what they are selling and have no reason not to trust that person. You should not feel like you are being sold. You have to understand the value of what you are receiving by that persons knowledge. It is not easy today to avoid problem stones where everyone wants a deal and most of the stones are going to markets who do not quibble about price. China and India have no history of what things cost even five years ago. What is ask is what is paid and happily. There are qualities and sizes I have to wait in line for. If a deal is easy maybe there is a reason. What do you think?
Remember if you do not know what you are buying you do not know what you are giving up!
