How To Calculate Diamond Ring Prices
The 12Cs of Figuring Out Diamond Ring Prices
These are primarily divided this way. First there are the traditional 4C:
- Quality of the Cut
- Clarity
- Diamond Carat weight
- Color
Additional factors that go into calculating diamond ring prices are:
- Certification of the diamond characteristics (the 5th C)
- Cloudiness (or the diamond transparency)
- Craftsmanship of the ring setting (the design and workmanship)
- Cut Design or the Diamond’s shape
- Conception, how the diamond was born. Was it made in a laboratory or did it come from the ground?
- Conditions of the market. Things that have a direct effect on the diamond prices and the prices of other precious metals from which the ring setting is made
- Cosmetic “surgery”. What treatments has the stone(s) undergone?
- Contractor’s markup. This is to both the diamond and the ring setting
The Traditional 4Cs
The first 4Cs listed(Quality of the Cut, Clarity, Color, and Diamond Carat weight) are estimated to determine 90-95% of the majority of the diamond’s price. So which of the 4Cs is the most important? It is generally believed that carat weight is the most important factor. Every jeweler will price diamonds differently taking different things into consideration, so this is not a hard fast rule.
If you buy from a Wholesaler or online retailer you will notice they will price their diamonds as close to the “market price” as they can get. This is because they either deal in very large volume(Wholesaler) or with price transparency and the ease of the shopping experience(online retailer).
If you go to a brick-and-mortar store you can see that they take other considerations when doing their diamond pricing. These locations factor in the location of their stores, the service they provide, their brand recognition, and an idea of how much markup they can bare that is based on the amount of traffic they get through their doors.
All jewelers are not going to agree on which factors are the most influential when doing their diamond pricing. Depending on the skill and background of the jeweler a large diamond with flaws may be seen as a worthy investment due to their skill in cutting it smaller diamonds, while a different jeweler may view the same diamond as a piece of junk.
Professional merchants in the diamond industry will use the Rapaport price as a starting point for coming to a “wholesale” price on their diamonds. Others in the industry also use this “Rap price” as their starting point for their loose diamond pricing. The Rap price is not perfect, however, and does not take quality of cut into account and price stones based on carat weight, clarity, and color. This means the Rap price can be off 20-30% from the determined wholesale price on both the high and low end. To really understand how diamond prices are calculated we need to dig a little deeper into the additional Cs.
Conception
We have been digging diamonds out of the ground for centuries but only have been making them in the lab for decades. Over the years laboratories have perfected their techniques and are now able to produce gem-quality stones that are impossible to differentiate from natural diamonds without sophisticated testing.
It’s worth noting that most jewelers are unable to tell the difference between a lab grown diamond or a naturally occurring one until they look at the brand name inscribed on the diamond’s girdle or read the brand name that comes with the diamond’s packaging. There are ways to tell if a diamond was laboratory grown though, such that natural diamonds are more likely to have internal flaws. A diamond of a fancy color, a rare occurrence in nature, can also be an indication that the diamond was lab grown. Whatever the original of the diamond is, man-made or naturally grown, they are both held to the same standards. Unsurprisingly, the largest differentiating factor between the two is price. Naturally occurring diamonds command a price premium over “man-made”, “cultured”, or “laboratory grown” diamonds. Naturally, you can expect to pay a lot more for an Earth grown diamond.
Cut Design (Shape)
Even in laboratories, all diamonds are not created equally. Some designs will require a larger rough diamonds from the start. Other types of cuts will waste more of the rough diamond. Some cuts of diamonds require a high level of expertise from the jeweler who crafts them.
Round cuts are more expensive to produce because they remove more of the rough diamond than other cuts. Seventy five(75%) percent of the diamonds sold today are round cuts. This means that if your diamond ring, or the one at the shop, needs to be resold it will be much easier to resell it if it has a round cut.
Craftsmanship (Setting Style)
There are a wide variety of ring setting styles and an infinite number of ways individual embellishments can create the diamond ring’s style. The more time the jeweler spends crafting the setting, the cost increases in relation to how much they have worked. The more complex and intricate the diamond ring is to make and if any unusual skills are needed by the jeweler to make it happen, the cost will naturally increase than a diamond ring in a standard setting.
Certification
You can buy diamonds with or without certification in the 4Cs. An uncertified diamond will cost less than an identical diamond that is certified. There’s a huge amount of sources from certifications. These range from world known gemological institutes(such as GIA and AGS), to in-house gemologists. You can always send the diamond for certification after you buy it, usually for much less than the cost of the difference between a certified and uncertified diamond.
Cosmetic “Surgery (Treatments)
Another thing that affects diamond ring prices is Treated Stones that have had “cosmetic surgery” done to them in an effort to enhance their appearance. This adjustment to the look of the diamond can be determined by a trained gemologist. Words to look for that can tip you off to cosmetic adjustments are irradiated, HPHT process, coated, processed, enhanced and so on. If you need any of those words mentioned on the website, by the jeweler, or on the certificate then the diamond has been treated. Treated diamonds will have lower value than their untreated counterparts.
Some jewelers will put a premium price on treated diamonds telling their customers that they should pay for having their diamonds enhanced. Generally, treated stones will cost less, but with jewelers making this adjustment to their diamond prices, it is not true across the market.
Most of the treatments used on diamonds will negatively affect the stone over time. Long term effects include the filling changing color after exposure to certain kinds of lighting to high pressure and high temperature treatments leaving the diamond more brittle, prone to scratching or chipping, to laser created holes in the diamond causing them to be more susceptible to damage from reducing the stone’s stability.
Cloudiness (Transparency)
A colorless, transparent diamond are valued a lot more than diamonds that are white, milky, or cloudy. Transparency is not a graded factor when determined verification though.
If you want to test for transparency view your diamond from several different directions, as well as viewing the sides, to see if you can see through the diamond in the same way you can see through a glass a water.
This C is often confused with Clarity, which describes inclusions and blemishes, not cloudiness, though a white cloud is one type of inclusion that can carry certification for a clarity grade. Since some diamonds can be white or cloudy throughout these non-transparent diamonds will not have the same sparkle as transparent diamonds. It’s interesting to note that these cloudy diamonds were once considered industrial grade and not cut into the diamonds we’re familiar with.
Transparency can also be confused with another C, Color, so when a dealer asks for certification on a cloudy diamond he may request that it also carry a clarification grade with it. From this certification it may be concluded that the diamond is “fancy white” in color.
If your heart is set on a white diamond then look for a non-transparent diamond. It just might be the perfect piece in your diamond ring’s design while it will also lower the diamond ring price.
Contractor (Location)
How you choose to purchase your diamond has an overall effect on diamond ring prices too. The phrase used is that a diamond ring may be purchased through “clicks, bricks, or bulk” meaning through an online retailer, a brick-and-mortar store, or through a wholesaler. Any purchase from a true wholesaler should be less expensive than from a retailer store and might be less expensive than purchasing the same diamond through an online retailer. The catch is that most wholesalers are not in business of selling diamonds one at a time. As usual, you should shop around to try to find the best price in the market.
Market Conditions
The world is filled with diamond mines in operation and is also full of diamonds being grown in labs creating gem-quality diamonds ready and waiting for you. The supply is actually very high, so a new addition of a new diamond mine or a new diamond laboratory should not increase diamond ring prices. What most people don’t realize is that the diamond market is not a perfect market, like you would assign to something like stocks and bonds, it is, in fact, a near monopoly that for more than one hundred years has been controlled by the Oppenheimer family through their commanding and majority stake in the DeBeers holding company. Today the Oppenheimer family shares control over the diamond industry with a global mining conglomerate called Anglo American.
Due to this monopolistic position if there were a sudden spike in the for diamond engagement rings needed it would have little to no effect on diamond ring prices in the open market. Sadly, couples get divorced, people pass away, and the inheritors of these once own diamonds may sell them back to the jeweler, or whoever makes a decent offer, putting them back on the market.
There is only one thing that could happen that would cause a significant shock to diamond ring prices in the market and that would be either a huge anti-diamond movement or a major break up of the DeBeers company and their monopoly on the supple of rough diamonds. The DeBeers monopoly has been challenged in recent years by a company out of Siberia named Alrosa. Alrosa has learned that putting their diamonds into the DeBeers area has not been a smart move though, so ended up pricing their diamonds closer to where DeBeers finds them worth. This has kept diamond prices largely in tact, but diluted the market in such a way that DeBeers no longer has complete control over it as they once did.
The metal used does have an impact on the market costs of diamond ring prices, however, such as gold, silver, platinum and others because they cost money themselves. The amount of any of these metals will have a direct bearing on the end price of the diamond. If you increase the ring size, this can often include an additional cost due to the need for more metal.
The best way to estimate the value of your ring’s setting material find out its exact weight then research the current market price for that material. The type of metal used in the ring can be found in the ring band with a stamp indicating what type of metal it is.
Non-Factors in Diamond Ring Prices
Age
Older diamonds can look dull or lifeless. Some of the cuts of older designs used on the diamonds may have caused them to not sparkle. Both of these are the results of technology finding its footing over time where jewelers learned more and technology allowed them to do more on a more exact level. The age of the diamond should be on its grading certification or as part of its cut grade. Age of the diamond does not factor into its overall value.
Sentimentality
It’s important to leave sentimentality aside when calculating diamond ring prices. What would the diamond ring price be on an open market? They would be unaware of any sentimental value it carried, especially after going through a few hands. Closer to home, this can matter if a relative is asking an enormous price for a diamond. You can just politely decline the offer and get it graded by a professional jeweler. It’s best to leave this factor alone as it holds no bearing on the overall value and diamond ring price.
To Conclude
Diamond ring prices clearly depend on a lot of different factors, but each one of those factors does not stand on its own and is not exclusive from the other factors. With so many variables it’s important to price check around the market. It also is important to be knowledgeable of things that will, or will not, affect the overall diamond ring prices you will come across. The 4Cs are important and lots of people cling to them, but remember that there are in fact 12Cs that weigh in on the final diamond price.
