Diamonds are forever. It is so oft repeated that it has become a cliche -- yet, nonetheless, it’s true. From a customer standpoint, diamond pieces have an enduring place in the hearts of those who wear them. From the point of view of the designer and retailer, diamonds are a solid investment because they retain their value more effectively than many other commodities. Let’s take a look at trends in loose diamond prices and the factors that influence them.
Diamonds are an Investor’s Best Friend
In 1960, a one carat diamond cost approximately $2700 (of course, depending on its quality and how it ranks in terms of the 4 Cs). Fast-forward to 2016, and that figure jumps to over $30,000. There is a clear and consistent upward trend.
At the same time, rough diamond production has remained relatively stagnant from 2009 and 2016. This supply is expected to be consistently depleted year over year in the near future. Experts predict that by 2050, there will be a shortfall of 278 million carats.
To complete the trifecta of factors influencing loose diamond prices, economic growth is creating more demand for luxury goods. As a result, it is projected that natural diamond prices will increase about 6 percent per year through 2020.
What does this mean? Investing in loose and melee diamonds now will position you to take advantage of market trends. More on this in a bit. First, let’s examine some of the factors that impact pricing.
The 4 Cs -- and More
Not all diamonds are created equal: to ensure the most favorable ROI, you must be as discerning as possible. Look for:
Carat: Carat size is a significant factor in loose diamond prices. Bigger isn’t always better, which is why you also have to take into consideration color, clarity, and cut. In some cases, a smaller carat size with better cut is far more preferable. Weigh the attributes to maximize your investment.
Cut: Cut is the biggest determining factor of sparkle and brightness; it gives a diamond its “fire.” Again, a well cut diamond is worth its weight in… well, diamonds! Poorly cut stones will not reflect light as effectively, and they appear dull and “lifeless.” Look for a GIA cut grade of either Very Good or Excellent. Yes, it will cost you more, but you then have flexibility in terms of your profit margins as you turn the resulting pieces around in a retail setting.
Color: Diamonds with a color grade of D, E, or F are of higher quality; that is, they are colorless. Again, these diamonds will cost more initially, but they will net you a larger profit.
Clarity: Diamonds are natural products. As such, they will have imperfections and flaws. They may have bubbles, white spots, cracks, or areas of cloudiness. The clearer and cleaner the stone, the more valuable. Simple. Some inclusions are not noticeable to the naked eye, so it is important to partner with a reputable supplier, examine authenticity and grading reports, and, in some cases, have the stone appraised by an independent lab.
Now, you can “cheat” a little here. If you are trying to stay within budget (and who isn’t?), you can opt for a stone with lower clarity that disguises the imperfections. Make sure you understand this and pay for exactly what you’re getting.
Shape: The diamond’s shape (e.g. round, princess, cushion, emerald, asscher, oval, pear, marquis, etc.) impacts price. Popularity plays a role: round is by far the most desired among consumers, and most expensive. This is because you need a larger rough diamond in order to cut a perfect round diamond. “Fancy” cuts (essentially any cut that is not round) can be achieved with less waste. This means that they typically cost less per carat. You can enhance their beauty and effect by choosing the right settings and pieces.
GIA-Certification: Trust is a huge factor in the jewelry business. Trust -- with verification. When purchasing loose stones, expect a GIA report and certification. This institution is an independent nonprofit whose mission it is to protect the industry and consumers. They don’t have a skin in the game, so to speak, so you can trust their processes and authentication of stones. GIA grading reports ensure you are paying the appropriate price for the stone based on its quality -- not on exaggerated claims.
Note: GIA does not grade melee diamonds; their small size typically makes doing so cost-prohibitive. In this case, be sure you are working with an experienced and reputable supplier. Larger stones in their inventory should be GIA-rated.
Maximizing Your Investment
As mentioned, diamonds can be a terrific investment. You can maximize profits by working with trustworthy suppliers and by leveraging your stones to their best advantage. For example, you can highlight a center stone by creating a halo setting with melee diamonds. This makes the stone appear larger and more brilliant, and it can help you increase profitability. Melee can also add brilliance and sparkle to any number of other designs without greatly increasing your cost.
The upward trend in loose diamond prices will continue; as demand grows and supplies shrink, the value of diamonds will grow. While this does increase your initial investment, it also enhances the profits you can realize with your clientele.