There are Three Steps to Buying a Diamond
Before you can work out whether you are getting a good deal when buying a diamond, you have to make sure that you know what you want and that you are getting what you pay for. Follow the process below to make sure that you don’t get scammed when buying a diamond.
Step 1 – Certification:
The is by far the most important step. If you are buying a diamond for over $1000, you need certification. This gives you peace of mind that you are getting what you paid for. There are only two certificates that provide this. They are from GIA and AGS laboratories—the gold standard for the diamond industry.
Step 2 – Quality:
Now you know which certifications to use, you need to know about the qualities listed on those certificates and what to do with that information. There are four Cs when it comes to diamonds: color, clarity, cut, and carat.
Step 3 – Pricing:
The best way to figure out price is the same way it always is: shop around. Blue Nile and James Allen are the industry leaders. Buying online will always be cheaper than buying in store. But by looking around you can figure out a baseline price.
The Bottom Line
If you follow the advice in this article, you can make sure that you are getting true value.
Calculating Diamond Prices
You can use our calculator below to find an expected range of diamond prices. These are based on online prices.
Going into Detail
There are some universal rules when it comes to diamonds.
The first is that diamonds are priced per carat. So if a 0.5 carat diamond has a price of $1000 per carat, the cost is 1000*0.5 = $500. The second is that the price per carat jumps as you move to higher weight categories. That means the price of diamonds increase exponentially with weight.
Categories and their Importance
Being aware of categories is very important when it comes to buying a diamond. It would be wrong to assume, for instance, that the price per carat increases continuously with weight. This isn’t the case.
That’s because diamonds are retail products and are driven by emotion. So a 0.99ct diamond may only be worth 1% more than a 0.98ct diamond. But a 1ct diamond might be worth 20% more than a 0.99ct diamond.
Why? Because people can say it is a 1ct diamond. That’s a bigger statement than saying it’s a 0.99ct diamond.
Cutting and How it Impacts Price
Because of this pricing discrepancy, many diamond cutters go to extreme lengths to keep diamonds above 1ct. Cutting the stone and causing it to fall below 1ct, even if it is much prettier, can result in a big loss. That’s why many diamond companies have gone to extremes and produced worse cut diamonds in order to make more money.
The Diamond Price Chart
There are two different categories when it comes to pricing diamonds. Those priced off of the Rapaport diamond price list and those that aren’t. The following is an up-to-date chart on diamond prices from Rapaport.
What is the Rapaport Price List?
Martin Rapaport started out as a cleaver and rough sorter in Belgium. He began brokering rough and polished diamonds in NYC in 1975. Three years later he created the Rapaport Prices List. Since then, he has founded many businesses in the diamond industry.
The Rapaport Price List is released every week on a Friday—even if it doesn’t change.
It is THE baseline used to price all loose diamonds sold as individual stones that are generally SI3 or better in clarity or K or better in color.
How to Read the Rapaport Report
If you look at the price list you will see four grids. Each one is dedicated to a different size category. Each grid is a matrix of color against clarity, as seen above. That means you need three pieces of information to find a price: the size, the color and the clarity.
The prices are always listed in hundreds. So a 43 is $4,300. Finding the Rap Price is only the beginning, however.
Why Companies Lose Certificates
You will rarely see a diamond with I1 clarity sold with a certificate. That is why it is such a big deal that James Allen has decided to sell GIA certified I1 diamonds.
This is because companies know they can sell the diamonds for more without the certificate and therefore without using the Rap Price. So if they receive an I1 clarity grade for a diamond they thought they were getting an SI2 grade, they will throw away the certificate.
Discounts and Premium Prices
The art of diamond pricing is figuring out the discount or premium to the Rap Price. In most cases diamonds will trade at a discount to the Rap Price. This is what dealers will haggle over.
When you use the Rap Price as a guide, you only use color, clarity and weight. That leaves other factors such as cut, fluorescence, inclusion quality and luster to haggle over.
20 Back and 20 Below
Say we have an SI1 diamond that was an excellent cut and the SI1 was way off on the side and barely visible and the H color was really a G, and there was no fluorescence, the diamond might trade at 20% less than the Rap Price. This is 20 back or 20 below.
This is what is argued over. The seller may want to sell it for 15 back. If they settle on 17 back you reduce the Rap Price by that percentage.
The Sweet Spots of Value
Look back at the Rap Sheet again and you’ll see that the difference in price between adjacent squares are far from uniform.
The difference between a G color VS2 and an H color VS2 is $1000. But the difference between a G VS2 and a F VS2 is only $500.
That means there will be some cases where it isn’t worth upgrading to a higher grade in color or clarity.
How Color and Clarity Impacts Diamond Price
Because a lot of the business is based on the Rap List, far too much weight is given to color and clarity when determining price.
Objectively, a G SI1 with an ideal clut will be much prettier than a G VS2 with an average cut. Taking into account discounts, such a diamond would probably be cheaper, too.
That’s why it’s so important to have an expert help when choosing a diamond
Pricing Alternatives to the Rap List
There have been several attempts to create alternatives to the Rapaport Pricing List over the years. That’s because there is much to criticize about it.
It’s not clear what the methodology is and Rapaport himself has financial interest in diamonds so there is a clear conflict of interest. One of the best attempts of recent years came from IDEX.
IDEX offers online B2B industry diamond exchange as well as publishing industry analysis like Rapaport. Unlike Rapaport, however their diamond pricing tool is completely transparent. It has been met with applause from some dealers but resistance from the greater industry.
Diamond Retail Benchmark
As well as the Diamond Price Report, IDEX also publishes the Diamond Retail Benchmark – a consumer focused price list. Like Rap, this offers a top-level price off which a discount should be applied.
Diamonds Price Without the Rapaport Price List
All other diamonds that aren’t certified and sold not as single diamonds are sold according to a parcel price. This is a price per carat for the wright, irrespective of the number of diamonds. This is a much more nuanced approach and requires the help of an expert.
Relying on Experts
To demonstrate this, at Leo Schachter, there weren’t any employees who were experts in every shape and size. That’s how complex parcel diamond pricing is. As such the company was broken down by shape and size to allow managers to specialize.
This just goes to show that you should buy a certified diamond unless you have an experienced gemologist that you absolutely trust.
Armed with this information, you can now shop with confidence. Below is a review to the #1 place to shop online: