|
What
Factors Determine Diamond Prices?
Author: Ian Maher
If you have
been shopping for diamond jewelry, you have probably noticed that
jewelry such as engagement rings, eternity rings, diamond necklaces
and earrings are on the market for a wide range of prices. In fact,
the difference from one diamond ring to the next can easily be
several thousand dollars. For most consumers, price is an important
factor in a buying decision, so it is important to understand what
you are paying for when you purchase a brilliant piece of diamond jewelry.
As with many
consumer products, diamond prices paid by end users are affected by
the value that is added at each level of the supply chain. Diamonds
are mined from the earth in what can be expensive, elaborate mining
operations, incurring an initial cost. Of course, diamonds do not
emerge from the earth in the beautifully polished cuts commonly seen
at jewelry retailers. After being mined, diamonds are typically cut
and polished before being sent to an independent laboratory for
grading. Then diamonds are placed on the market for purchase by
wholesalers or diamond dealers, who in turn sell them to various
retailers. Finally, diamonds are in retail stores and ready for
purchase by consumers. Each stage of the supply chain adds some kind
of value and incurs markup, each of which are reflected in the end
price a consumer will pay for a diamond.
The cost to
mine, prepare and market a diamond is not the only determinant of the
end price of a piece of diamond jewelry. Also included, of course, is
the complete cost from mining to market of metals and other gemstones
that make up a piece of jewelry, as well as crafting of the piece
itself. Diamonds are appraised and valued individually based on
evaluation of the four Cs—carat, cut, clarity and color.
The price of a
diamond is calculated based on some determined value per carat. That
is to say that the value of a 0.5 carat diamond which is valued at
$3,000 per carat would be calculated as $3,000×0.5 = $1,500.
However, despite the apparent simplicity of the (price per carat x
carat weight = diamond price) equation, several factors influence the
determined per carat value of an individual diamond. Evaluation of a
diamond’s color, clarity, and cut contribute to the
determination of its per carat value, with diamonds exhibiting the
most attractive combination of features being considered the most
valuable and thus the most costly., the carat weight for an
individual diamond is also affected by its rarity. Since a one carat
diamond is much rarer than a half-carat diamond, a one carat diamond
will incur a higher per carat weight than an otherwise equivalent
half-carat diamond. Though tempting, it is inaccurate to assume that
you can simply plug the carat weight into an equation to determine
the value of a diamond. Each diamond must be individually appraised
in order for a value determination to be made. |
|
