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What Is The True Reason That Diamonds Cost So Much Money?

What Is The True Reason That Diamonds Cost So Much Money?

Let’s say that you wanted to surprise your loved one with a beautiful piece of jewelry, ideally a diamond. But when you walked into the store and saw the price tag, your heart skipped a beat.

We’re not surprised at all. Diamond prices can often be higher than you initially thought.

And since the price tag is an unavoidable, and at most times, a deciding factor, we’re going to tackle a pretty major question here: What is the true reason that diamonds cost so much money?

You probably guessed it. The most influential factor here is the market demand for cuts and carats. However, there’s much more to this than price-fixing.

If you wonder why some diamonds cost so much money, which is the most expensive gem, or want more useful tips that can help you choose the real deal, you’re on the right track. 

Read on!

De Beers – A Familiar Name In The Industry

Around the 1800s, diamonds were considered a rarity. There was no hint that these gems would one day become the most valuable jewelry on the market.

Diamond particles and rough diamond stones were mostly found in the areas of Brazil and India, where most trades took place. These were still rough gemstones, and they were not generally not available to ordinary people. 

These diamonds were mostly owned by monarchs and church authorities.

However, in the early 19th century, the so-called Diamond Rush began in South Africa. That provoked all sorts of responses worldwide, and pretty much every business person who had at least some basic understanding of trading knew that this was an excellent opportunity to make a profit and obtain wealth.

That’s where the name De Beers comes in. This name changed the diamond market and the circulation of this gemstone for good.

The person who started it all was Cecil Rhodes, a born American who decided to use the situation in South Africa to his benefit. What he did was rent water pumps at first. Then, after a while, when money accumulated, he started buying off diamond fields.

He even bought off the field that was owned by the De Beers brothers in 1880. That’s how the De Beers Mining Company came to exist as the forerunner of today’s diamond market.

The business progressed so much that it only took a few years for the De Beers Mining Company to become the owner of all South African diamond mines.

By 1888, this company created a monopoly over the entire distribution and sale of diamonds that came out of South Africa. The De Beers had connections with many notable companies in London and Israel.

Related Read:

“A Diamond Is Forever” Campaign Bringing In The Money

After Cecil Rhodes died, Oppenheimer took his place and, once again, changed the course of diamond distribution. This time, however, the price was one of the critical factors.

During The Great Depression, the price of diamonds dropped dramatically. This change forced the Oppenheimer family to create the famous “A Diamond Is Forever” campaign.

The goal was to – well, encourage people to buy diamond rings. Men were led to think that the bigger the diamond they purchased for their wives, the more they loved them.

A clever way to make money, huh? And that’s exactly what this campaign was all about: Throughout this campaign, the wholesale price of diamonds jumped from $23 million to an incredible $21 billion. A record-breaker!

The impact of this campaign and the De Beers Company can still be seen today. According to some statistics, more than 75% of brides in America have a diamond ring on their hands. The approximate price of this piece of jewelry is around $4,000.

It’s easy to draw a lesson from this: Through smart advertising and market exploitation, diamonds have become the best-selling symbol of love, commitment, and endurance.

See Also: Do Diamonds Last Forever?

But Money Is Not Forever…

Fame and money don’t last forever, and every smart business person knows that. Even the impressive monopoly that the De Beers had over the diamond mining and distribution had reached its breaking point.

That’s best explained by the fact that the distribution of diamonds dropped from 75% to 35%. Several factors contributed to this decline, and the most important ones to mention are:

  • Massive interest in synthetic diamonds
  • New independent diamond suppliers that entered the market
  • Separation of Argyle Mile in Australia
  • Many allegations related to price-fixing and antitrust campaigns
  • Discoveries of new diamond mines in Canada

Read More: Price Of Diamonds Over The Last 50 Years: How Did It Change?

Cut And Carat Affecting The Price?

The two most influential factors that shape the price of a diamond are its cut and the number of carats. Professional jewelers and gemologists must first be familiar with the grade of the gem’s cut to determine a possible price. 

Here’s a reminder on how to grade a diamond’s cut:

  • Excellent
  • Very good
  • Good
  • Fair
  • Poor

How does the price fit into all of this? The more refined the cut, the higher the price.

The part gemologists pay special attention to are the facets, the flat surfaces on the gem. Diamonds that don’t have precisely cut facets do not retract and reflect light as they should. And that automatically reduces their value.

A diamond’s cut affects its beauty. Here are some direct factors that can affect the price, be it positively or negatively, and they are all related to the gem’s cut:

The second factor is the carat number. Many people still believe that this is related to size; however, carats refer to the actual weight of the diamond.

One carat is approximately equal to 200 milligrams. And as you might’ve guessed, the higher the number of carats, the higher the price of the diamond.

Here’s something you should know about carats and diamonds: In the diamond industry, it is much harder to find smaller diamonds. That means that it is much harder to find diamonds that fit most people’s budgets. 

If you are looking for a diamond with the highest quality cut, your choice should be the round brilliant cut. With that in mind, let’s take a look at some prices:

Carat WeightPrice
0.5 carats$1,220 – $5,800
1 carat$2,500 – $18,000
2 carats$4,200 – $29,000
3 carats$7,200 – $51,000
4 carats$8,400 – $71,500
5 carats$9,600 – $69,500

To be honest, this crosses the budget of the majority. Don’t worry, though. There are ways to buy a beautiful and quality piece of jewelry without spending two or more months’ worth of salary.

Learn More: 4 Cs Of Diamonds – Order Of Importance: The Most Important C?

The Most Expensive Gems In The World

So far, we’ve talked about how the market, cut, and clarity has affected diamond prices. Now it’s time to touch on a few specific numbers. Below are some of the most expensive diamonds in the world.

DIAMONDCARATCUTPRICE
The Koh-i-Noor105.6 caratsOval brilliantPriceless
The Sancy Diamond55.23 caratsModified brilliantPriceless
The Cullinan Diamond3.106 carats105 stones of assorted cuts$400 million
The Hope Diamond45.55 caratsAntique cushion$350 million
De Beers Centenary Diamond273.8 caratsModified heart-shaped cut$100 million
The Oppenheimer Blue Diamond14.62 caratsRectangle$57.5 million

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How To Buy The Perfect Diamond? Crucial Factors

You can buy the perfect diamond without going over your budget. All you need to do is pay close attention to a few key factors.

Cut And Carat

The first thing you need to decide on is the cut you want. The most popular choices these days generally include round, cushion, and princess cut

Bear in mind that you choose a diamond cut following your budget. So, here’s a little piece of advice:

If you hope to surprise a loved one – or you simply want to treat yourself with diamond earrings – don’t settle for poor-quality diamonds. Try to save money for at least fair-quality gems.

Poor quality cuts, especially with engagement rings, lack brilliance and can start looking cheap over the years.

Since you are already inquiring about the cut, try to find out something about the number of chevrons as well. These are the side facets of your potential diamond.

Here’s the deal: The more facets the gem has, the better it will reflect light. And that means it will have a more attractive appearance, too. A smaller number of chevrons implies that the diamond will have a smoother, less striking appearance.

Once you have decided on the desired cut, it’s time to move to the number of carats. As we’ve already mentioned, the higher the number of carats, the higher the price. The best-selling diamonds generally have 0.5 to 1 carat.

Choosing The Color

In addition to the cut and carat number, many people also pay attention to the color of the diamond. As you might have guessed, colorless diamonds are the most expensive. If your budget is flexible, choose a D-grade diamond.

As for color, things work a little differently. The most expensive colored diamonds are red diamonds. In fact, the most expensive pieces can reach up to a million dollars.

Other groups include:

What about fluorescence?

Fluorescence occurs when a diamond is exposed to intense or UV light. Strong fluorescence can sometimes affect the overall appearance of a diamond – and could pose a problem when it comes to quality.

If you don’t have a lot set aside, diamonds with stronger fluorescence will probably be a safe bet since you can usually get a discount.

Read Also: Can Ultraviolet (UV) Light Destroy A Diamond?

Get An Expert’s Opinion

If you’re buying a diamond for which you have decided to set aside more money, it won’t hurt to have it examined by the expert first. Their opinion can be crucial in buying.

Why are we emphasizing this?

Because the jewelry market is vast, people often get carried away and buy a low-quality gem at a high price. For instance, buyers will usually choose to ignore the factors we mentioned – and choose to follow their instinct instead. 

And in this market, that doesn’t mean a smart purchase. The most common mistakes people make when buying a diamond are:

  • Overpaying
  • Expecting too much
  • Buying the wrong sort

Each of these mistakes has to do with money – allow us to explain.

The first and most common mistake is overpaying for the diamond. People usually pay twice as much for a diamond without even knowing anything about it. That is because they do not inquire about the diamond itself before buying, or worse, they rely on online shopping.

Before buying a gem, you should know at least some basic information about it – cut, carat, or clarity.

On the other hand, some people go in way too optimistic and end up disappointed by the result. Diamonds are unique gemstones. However, some jeweler shops know how to overdo it with words of praise.

The last one would be buying the wrong sort. 

Besides getting the wrong cut, that also includes buying diamonds that are not appraised or certified. And when we say “certified,” we mean approved by GIA or AGS. Buying diamonds that do not have a paper that confirms that they are real can spell “trouble.”

Learn More: Is IGI As Good As GIA?

Final Thoughts

That’s about it. We were able to answer the question of why diamonds cost so much money. Now, let’s single out the most important points once again.

The name that started the trading of diamonds was De Beers. During the 19th century, this company was responsible for more than 75% of the diamonds coming out of South Africa.

A little later, the “A Diamond Is Forever” campaign launched and upped the sales – and, in turn, prices – by convincing men that the bigger the diamond, the greater their love for their wife.

In essence, the two factors that play a critical role in price are cut and carat number. You’ll have to pay much more for a diamond with a refined cut and more carats. 

So, before you buy a diamond, it would be good to have some money already saved. Also, when buying, it is advisable to check the background of the jewelry store and the diamond itself so that you don’t get scammed.

We hope this was helpful!

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