Diamonds Update

Round Diamond Prices Up 8.5% Already This Year

Even though there is a softening of the Unite States diamond retail market, prices of diamond are continuing up due to increases in rough diamond prices.  Prices for rough diamonds this year through the May De Beers sight distribution are up 8.5% overall and over 25% over the past 12 months.  However, most of the price increases were for high clarity and larger carat weights (those that will be finished to 2-carat weight).

One of the reasons that diamond prices is continuing to go higher is that the worldwide demand for diamond jewelry is still growing, thanks in part to an exploding Chinese jewelry market.

While the price increases for rough diamonds mean higher prices for consumers, it is the middle of the diamond distribution pipeline that are getting hurt the most.  The diamond cutters and wholesalers are often not able to pass on all of their cost increases and become susceptible to cash flow shortages.  For many of these diamond cutters, survival will depend on whether they can pass these cost increases to retailers and what financing support they can get from banks.

Laser Drilled Diamonds

One treatment to enhance the clarity appearance of a diamond is laser drilling, which consists of using a laser to bore a hole in a diamond.  The hole, resembling a wormhole, is used to reach a dark crystal so that acid can be injected to bleach the inclusion and make it a lighter color. 

Laser drill holes are usually easiest to see from the side of the diamond.  The “wormhole” extends from the surface in a straight line down to the target inclusion.  The hole on the surface can often be felt if explored with a sharp pick or needle.

Sometimes the laser drill hole is then fracture filled with a liquid glass-like material to make the hole less visible.  Fracture filling is also used in diamonds without laser drilling when it is injected into fractures that reach the surface (feathers).  Companies that perform fracture-filling market themselves as being better than their competitors are, based on the proprietary formulas they use for the filler substance.  Most fillers react to heat, light, and other conditions, thus changing color or becoming more visible over time.

It is critical that laser drilling be disclosed to the consumer, even though the Federal Trade Commission Guides for the Jewelry Industry do not require disclosure.  Therefore, it is up to the diamond suppliers (wholesalers and retailers) to ensure that this treatment is properly communicated, especially to the consumer.

While the purpose of laser drilling is to improve the appearance of the diamond, there is still much debate over how to price these diamonds.  Obviously, the biggest danger to the public is if they purchase a diamond that has been laser drilled without being informed of the treatment.  Most consumers do not inspect their diamonds under a microscope and are relying on the word of the retailer or on the report from a grading laboratory.  The best protection to avoid laser-drilled diamonds is to purchase GIA graded diamonds because the GIA always indicates on the Diamond Grading Report if a diamond has been laser drilled.  Laser drilled diamonds should be properly disclosed and sold at a lower price.  Since most knowledgeable diamond shoppers avoid laser-drilled diamonds, they become very difficult to resell.

The laser drilling is not to be confused with laser inscription, which is the etching of the certification number on the diamond for identification purposes.  The laser-drilling process actually bores a hole into the diamond, while laser inscribing only darkens a thin layer of carbon molecules on the surface of the diamond and does not damage the diamond.

Diamond Laser Inscriptions

Laser inscriptions are messages, usually grading report numbers, inscribed on the girdle of the diamond.  The process uses a very precise laser beam to transform the micro thin layer of diamond from its transparent form to an opaque carbon (graphite) form that is visible under magnification.

Today’s laser inscription technology uses a “cold laser” process that utilizes the short wave length of light and thus has no thermal effect on the diamond.  This safe process will not chip, fracture, or otherwise damage the diamond while providing great control over the precision, contrast and depth of the marking.

Because diamond laser inscriptions can use any text, font, symbols, or artwork, they provide great flexibility for identification and marketing efforts.  The laser inscriptions are so small that they are not visible to the eye.  They are visible using 10x magnification, but are usually more readable with 20x or greater magnification.

The most common use of diamond laser inscriptions is to label the diamond with the certification number for the grading laboratories’ diamond grading reports.  Since laser inscriptions can be applied by anyone with the inscription equipment, there have been some rare cases of fraud.  Usually this can be avoided by simply cross-referencing the inscription number with the grading laboratory’s database.  For the GIA numbers this information is available at http://www.gia.edu/reportcheck/.  If the laser inscription was done prior to or during the inspection at the grading laboratory, the laser inscription is usually indicated on the actual diamond grading report.  Sometimes the laser inscription is applied after the grading report, in which case the certification would not make note of the laser inscription.

The Canadian diamond industry has made use of laser inscriptions to differentiate their diamonds from other sources.  Many of the diamonds mined in Canada are laser inscribed with a marketing trademark, a “Canadian Product” notation, or a unique serial number including a code for the particular mine where the diamond was extracted. 

These laser inscriptions aid in identifying the diamond but are a valuable marketing feature for those diamond shoppers looking for something a little special or requiring a diamond from Canada.

Some branded diamond shapes or retail chains are using the laser inscription to market their diamonds as illustrated by the PrinceCut inscription photo on the right.  For the branded diamond shapes, the laser inscription provides a validation that the diamond is the branded or patented cut.

Another common use for diamond laser inscriptions is to indicate if the diamond displays a Hearts & Arrows pattern.  Since there are no industry wide standards for “grading” the Hearts & Arrows pattern, it is up to the owner of the diamond to determine if the pattern warrants an H&A laser inscription.  It has been our experience that some of the diamonds laser inscribed H&A have marginal Hearts & Arrows patterns while many diamonds displaying beautiful H&A patterns are not laser inscribed.  Grading laboratories do not determine H&A grades and many diamond wholesalers do not even own an H&A scope, let alone examine every round diamond they own so H&A inscriptions are somewhat hit and miss.

Since laser inscriptions can include any text or artwork, they can be used for personal messages.  One diamond cutting company, Trillion Diamond Company, used laser inscription as part of their patented Ten Commandments Diamond®. 

While a personal laser inscription could be a romantic touch to a diamond gift, the personalized message becomes a liability if the diamond ever needs to be sold again.  Not many diamond shoppers want a diamond with someone else’s names and wedding date inscribed on it.  A skilled diamond cutter can polish off the laser inscription but that requires additional time, effort, and expense and has the potential of changing the weight of the diamond.

While diamond laser inscriptions are a nice feature for identifying a diamond and we wish all diamonds were laser inscribed with their certification numbers, most diamonds (especially the bigger, more expensive stones) are not laser inscribed and there are other ways to identify a diamond.  With most diamonds, it is easier to see the unique "fingerprint” of inclusions than it is to read the laser inscription with a 10x loupe and few consumers have high powered microscopes necessary to read the laser inscriptions.

PrinceCut Diamond Shape

For diamond shoppers who like the shape of the emerald cut but would like to have more sparkle, yet not as much as the radiant cut, the PrinceCut diamond shape is a great option.

The PrinceCut, patented by the Avi Paz Group, was designed to be an improvement on the traditional emerald cut.  With 111 facets, compared to the emerald cut’s 57 facets, the PrinceCut has a much greater brightness and fire.  The PrinceCut® received international patents and a U.S. patent in August 2000.

The mesmerizing facet pattern of the PrinceCut diamond produces an ever-changing kaleidoscope of alternating reflections and flashes of rainbow colors.  The rectangular shape is stunning as a solitaire setting but also is beautiful in a three-stone ring.

Learn more about PrinceCut diamonds...

De Beers Role Has Changed

In discussions with clients the past few weeks, I have spent considerable time discussing the changes in the diamond industry, especially the role of De Beers.  The topic typically comes up when the diamond shopper makes a comment about De Beers owning vast supplies of rough diamonds and keeping diamond prices artificially high.

It becomes obvious that the average consumer is basing their perceptions of the diamond industry on stories that are now decades old.  Those of us who work in the industry every day are well aware that the industry has seen dramatic changes.

For about 100 years, De Beers operated a near monopoly by either mining or buying as much as 70% of the world’s rough diamond supply.  They did use their stockpiles of diamond to control the supply and thus the price of diamonds, keeping the industry stable during times of widely fluctuating demand and production.  A byproduct of the tight De Beers control was that they ensured the bulk of the profit left the country where the diamonds were mined as quickly as the diamonds were moved to London for sorting and marketing.

In the last decade, De Beers has dramatically changed their business model under the direction of Gareth Penny, the current managing director.  Today, De Beers only manages the diamonds it mines, which totals about 40% of worldwide production.  That means other companies market 60% of the world’s rough diamonds.  The vast stockpiles of diamonds are long gone with only enough diamonds kept to keep the pipeline of diamonds moving fluidly.

One of the other big changes is in how De Beers and the rest of the diamond industry are attempting to improve the lives of the miners and compatriots in the countries where the diamonds are mined.  There is no better example of this change than in Botswana.  The mines have long been operated as a equal partnership between De Beers and the government of Botswana but now the country is getting even more benefits.  De Beers has moved its diamond sorting operation from London to Gaborone, the capital of Botswana.  The new facility will employ 500 Botswana workers and generate another 2,500 support and related job, including 16 cutting and polishing factories built around the new sorting plant that will process about 22% of the world’s production.

The economic growth and governmental stability of Botswana have not gone unnoticed by other diamond producing countries, especially in Africa.  The De Beers/Botswana model is likely to be implemented in other countries and is expected to continue the ongoing positive change within the diamond industry.

Maximize the Price for Your Gold Jewelry

With the price of gold bouncing around the $1000 per ounce mark, consumers worldwide are sorting through their jewelry boxes for gold jewelry items they no long want.  Since the metal is being sold as scrap, it does not matter if the rings, bracelets, and other items are damaged or broken.

What many consumers do not realize is that where they sell their jewelry items may have a significant impact on how much money they get for their gold items.  Consumers must sell their gold items to retail business like jewelry stores, pawnshops, or coin dealers.  These retailers then sell the scrap jewelry to wholesale refiners who provide that service and are often located in different cities.

Just like there are no rules dictating what price a jeweler can sell an item, there are no rules on what price the retailer must offer for buying from consumers.  Prices offered by retailers can vary significantly with some retailers offering as much as double the rice as other retailers.  Why is there such a big variance in prices?

• Gold jewelry is an alloy with only a part of the weight being precious gold.  For example, 14-karat gold is 14/24 or about 58% gold.  Therefore, a one-ounce piece of jewelry only has about 0.58 ounce of gold.  When consumers bring in a bag of jewelry items, they seldom know the exact weight and composition of the metal.  Likewise, some retailers are not as experienced at determining the actual gold content of jewelry.

• Gold refiners typically pay retailers for scrap at about $20 to $30 an ounce less than the current market price for gold so are getting about 97% of the current market price.  However, retailers are generally offering consumers 50% to 75% of the gold’s value so are pocketing the rest.  With potential profit margins of 50% or higher, it is no wonder pawnshops are posting big signs advertising they are buying gold jewelry.

It is up to the retailer to decide how much of the value they want to offer the consumer and up to the consumer to accept or go elsewhere.  In fact, going elsewhere might be a worthwhile strategy if they have a significant amount of jewelry.  By getting price quotes from several retailers, the consumer can avoid the low offers and perhaps make double the money.  If you do not know what you have or what the true value of the gold is, getting numerous price quotes can help you maximize your gold jewelry sale.

If you do not have many options of places to sell your jewelry items, the more you know about your gold jewelry and the composition of the gold, the more advantage you will have when negotiating with the retailer.  If you have an accurate scales, weighing your jewelry can help you estimate the value if you can separate the jewelry into 10-karat, 14-karat, 18-karat, or 24-karat (pure) piles.  If you can get the retailer to offer you 75% of the gold’s value at current market prices, you should feel fortunate.

The more knowledgeable you are when selling your gold, the more money you will get.  Be wary of impulse selling, especially if you are depending on the retailer to tell you what you have and what it is worth.  On a recent trip to the diamond district in New York, there were people with “gold buying” signs about every twenty feet on the sidewalks.  Do not assume that you are getting a special deal in these tourist locations.  It is certainly not worth making a trip to New York or similar large city since retailers in your hometown might be willing to give you a better price.  The key is being knowledgeable so you will recognize an appropriate price.

Tourist Trap Diamond Shopping

I received the following email yesterday.

We bought princess cut diamond earrings in Aruba a year ago & came to discover through obtaining an appraisal here in the US that one of the diamonds is glass filled.  We went to the most reputable jeweler here in town & he recommended that we look at your website to learn more about glass filled diamonds.  During the course of the past year, we have tried unsuccessfully to get our money back.  When that did not work, we then said that our friends who go to Aruba every March would bring the earrings & exchange them for us.  That did not work either as the jeweler told them that for us to get the quality that we thought we were getting to begin with we would have to pay more money.  Our question to you is “is the value of the earrings less than what we bought them for”?  We have thought about selling them to someone here in the US but wonder if anyone would buy them knowing they are glass filled.  What is your advice? 

This is a classic example of what happens when tourist purchase diamonds at tourist locations.

1) While shops at tourist locations might be a good value for local, handmade items, diamonds are a completely different product.  Those tourist shops are purchasing them from the same cutters and wholesalers that source our diamonds.  The false assumption is that these tourist location retailers are somehow lower price.  The online diamond retailers in the United States have the most competitive market in the world.  Shoppers from South Africa, India, Australia, Russia, and Canada find diamonds are less expensive on the US retail market than in these countries that mine and cut diamonds.  The real deals are the low single digit margins on most diamonds at online retailers in the United States.

2) We recommend that diamond shoppers purchase GIA graded diamonds to ensure they know what quality of diamonds they are purchasing.  The GIA does not grade diamonds that are fracture-filled because that is a temporary process.  The GIA would identify any permanent diamond treatments on their Diamond Grading Report.

3) Tourist location retailers rely on impulse buyers for their business and they are shielded from the buyer’s remorse because it is so difficult for shoppers to return purchases they realize were not as advertised.  Buyer beware applies when you purchase outside the borders of the US because legal resource is very limited.  There is no Better Bureau, Chamber of Commerce, or local TV station available to uncover unlawful or unethical business practices.  The Aruba shoppers are likely in for a surprise if they think they will get a refund if they take the earrings back to Aruba.  The fine print on the sale probably only allows a store credit, if even that, and how wants to purchase from someone you already know does not practice good business ethics.

4) The deals that seem too good to be true while on vacation or even at the local jewelry store should raise a big red flag.  If the prices are lower than online retailers, that simply means the quality is not as advertised.  Tourist location retailers are not giving their goods away and typically have higher overhead than online retailers have.  This is especially true of tourist thinking they can find a good deal in the Diamond District of New York.

Because the shoppers in the Aruba story above did not know the quality of the diamonds they were buying, they probably paid much more for what they bought than they should have.  Now that they realize their mistake, their options are limited because most diamond shoppers are now well educated via the internet on how to get the best values when shopping for diamonds.  They will only get pennies on the dollar if they sell them to a jeweler or pawnshop, and they will find it difficult to find consumer who will buy them for anything close to what they paid if they disclose what they know about the diamonds.  Buyer beware also applies if you are considering buying from an individual.  You might be able to find a deal if the individual needs to sell, but it is only a “good deal” if the buyer knows exactly what they are purchasing, and the price is appropriate.

1.51 Carat Oval Diamond Ring For Sale

Diamond Source of Virginia has this beautiful 1.51 carat Oval cut diamond ring for sale.  The center diamond has H color and SI1 clarity with a GIA Certification and is set in an 14 karat while gold trellis style mounting. 

The specifications of the oval brilliant solitaire diamond are as follows:

Oval Cut, 1.51 carats, GIA cert, H color, SI1 clarity, depth 64.2%, table 53%, Very Good polish, Good symmetry, No fluorescence, measuring 8.34 x 6.39 x 4.10 mm, ratio 1.30 (ref: GIA certification 11696962, dated 8/20/01)

If you are interested in seeing this beautiful diamond ring, call 888-477-8385 for more information.

Click here to check out other Special Diamond Offers

Gemesis Working on Other Colors of Synthetic Diamonds

Gemesis, the Florida-based synthetic diamond company, currently only produces the laboratory grown diamonds in yellow and orange colors.  The company is working on production techniques to produced pink and blue synthetic diamonds.  It hopes to have that process developed by the end of this year.  Gemesis is also working on process that would eventually allow it to grow white diamond crystals in the 5 to 10 carat range that are in greater demand worldwide.  These larger sized synthetic diamonds are probably at least three years away from commercial production.

Gemesis has recently updated their web site to provide educational information about their company and synthetic diamonds, including the jewelry brands carrying Gemesis Cultured Diamonds.

Check out my previous post entitled "Synthetic Diamonds or Diamond Simulants: Why the Confusion?"

Letseng Diamond Mine Expands Production

Gem Diamond, who owns 70% of Letseng along with the Government of the Kingdom of Lesotho, reported an 81% increase in annual diamond sale in 2007 with $152 million compared to $83.9 million in 2006.  Because of the productive operations last year, Gem Diamonds is doubling production this year when it starts its second plant in June.  The new plant will process ore when it begins mining the main kimberlite pipe adjacent to the satellite pipe, which has been the source of some of the largest diamonds discovered in the world.

Letseng is renowned for its large white diamond finds and the large diamonds provide about 80% of mine revenues.  With approximately 85% of Letseng production being gem quality diamonds, an exceptional 14-20% of those stones are over 10.8 carats.  No other diamond mine can match the large-stone production of Letseng.  As a result, Gem Diamonds is investing in facilities to take advantage of the unquenchable world thirst for large diamonds and enable them to exploit the 25-30 years of mine life provided by development of the main pipe.

Some past posts related to Letseng Diamond Mine:

Letseng Mine Produces 18th Largest Diamond

493-Carat Diamond Name "Letseng Legacy"

Graff Jewellers Purchases 493-Carat Letseng Legacy Diamond

Four Giant Diamonds Discovered at Letseng Mine

215-Carat Diamond Sold

Lesotho Promise: Largest Diamond Found This Century

Diamond Mining Activity in Lesotho