Factors Affecting a Diamond’s Value

Some people call them decorative stones. Others think of them as symbolic celebratory pieces. Across the years, diamonds have become regarded as status symbols, a shining reminder of one’s reputation and financial capacity.

The value of these precious stones has declined over the years. In the 1980s, DeBeers took over diamond production and refinery, proclaiming that “diamonds are forever” even as its market monopoly crumbled during the Great Recession.

Market Volatility

Diamond prices and availability are dependent on the economy. When the economy is good, diamonds remain in demand and manufacturers continue to produce raw gemstones for jewellers.

Mines can get the support they need if economic conditions are favorable. They can find investors that do not have to worry about their finances and can provide sufficient financial backing.

In an economic recession, however, firms in any industry need to conserve resources and look after their own backs. Otherwise, they’d get dragged into the chaos and fail to sustain themselves.

Carat, Clarity, Cut and Colour (4Cs)

Besides market volatility, the 4Cs – carat, clarity, cut and color – can all affect a diamond’s value and cause price fluctuations. What essentially makes for a good diamond investment, however, is the rarity. But rarity can come in all shapes, sizes and qualities. Large diamond stones are generally considered naturally rare as well as high carat weight, perfect clarity and certain colors. Pinks, reds and those with blue or purple hues are the rarest color in the history of diamonds.

How a diamond is cut also affects its market price. Perfect cuts and complicated cuts (e.g. layered, rose style) demand higher prices. Flaws, lack of brilliance and disproportionate cuts lower a stone’s value. It will be relegated to a common gemstone that can neither be pawned or sold at a higher price. Low-value stones, unlike rare or top-grade diamonds, will only decrease in value across the years.

High-quality investment diamonds are the natural colored ones. Investment grade diamond colors include pinks, canary yellows (also known as intense yellow), reds and blues. These stones appreciate faster than translucent diamonds and common yellows. Pear cut pinks are likewise great colors for investment purposes. Pink diamond investment is particularly in-demand in Australia and in countries where rare pinks are mined.

Investment Management

To ensure your stone retains its value over time, use the same principles as you would in a stock portfolio market. First, do not purchase a diamond unless it is certified by a world-renowned gemstone lab such as the Gemological Institute of America (GIA).

If you buy loose diamonds without any certificate, have them certified immediately. Once you receive your certificate, submit it to an appraiser who will subsequently determine the actual value of the stones you purchased. The appraised value will help you gauge return on investment and market values in the future.