Diamonds: The Inside Story

Gemstones, and in particular diamonds, are interesting subjects because of several factors:

1. Their value is subjective, although the wholesale prices are supported by the De Beers family and the price table is maintained through advertising and withholding of stones. Individual stones are graded on a subjective basis and as such, the values increase or decrease abruptly if a further grading session disagrees with the original.
2. Gems offer a fairly stable method of converting large amounts of cash into small, liquid, easily transported possessions.
3. It is still possible to purchase gems in some areas of the world for substantially less money than in the United States and they can and are smuggled into the country for profit.
4. Synthetic gemstone manufacture and faux substitutions open an area of easy-to-maneuver and hard to detect high ticket fraud.

The gem and particularly diamond industry operates in a knowledge vacuum. There are a number of interesting facets, no pun intended, of buying, selling and scanning jewels that people in the jewelry business prefer not to let the public become aware of. If you are considering purchasing, investing in, or otherwise becoming involved with any sort of gem quality crystal, there are a number of things you can do to protect your investment.

For thousands of years diamonds have been a form of decoration, currency and investment medium. Diamonds have risen in price over the years fairly consistently with inflation. At some points investment in the right stone would have returned a much better percentage than similar amounts of stocks, bonds or gold. On the other hand, an investment in the wrong thing or an investment made blindly because of lack of knowledge, can and in many cases has caused the buyer to actually lose money.

Remember, diamonds are normally sold on a retail basis. This is where you, the consumer, buy most stones. As one purchases stones of a higher quality and larger weight, stones that are designed for investment purposes rather than ornamentation, it is possible to actually buy at or near wholesale prices. When one goes to sell the stone, if one simply walks into a jeweler or New York-type diamond seller, one expects to lose from the retail price the stone may have been purchased at.

A number of factors establish the value of a diamond, one of which is the size of the stone. There are certain levels where the value of a high grade stone jumps appreciably simply because the stone is over this weight. In general, a large high-rated stone is worth logarithmically more than a number of small stones equaling the larger stone's weight. It is, as one would expect, considerably harder to find flawless or near flawless large stones.

Source: Video Vindicator, 1992, BBS.