Race Car Jewelry

Mark Grosser, a track photographer at the Indianapolis Motor Speedway for 25 years, is one those happy souls who has successfully managed to combine passion, profession and hobby into a lucrative business: He designs his own line of miniature race car jewelry.

When John Andretti wanted a three-dimensional race car pendant for his wife, a new opportunity for Grosser knocked his door. With the help of photos that Grosser took at the track through the years working for United Press International, he started carving race cars out of gold. The challenge, of course, is to make the cars proportionally correct and set the stones perfectly. After customers pick out of 20-30 sketches, it is up to him to finalize a tailor-made unique jewelry which can be anything from race charms to key chains. His gallery which is not limited to cars, has more to offer.

Grosser displays his creations at 35 shows a year across the nation. Locally, he will be at Talbot Street Art Fair on June 13-14, and is one of the artists in the Indiana Artisan program, which was started in 2008 to raise awareness of Indiana-made products.

Iridesse Pearl-Jewelry Chain Closes

World's second largest (after Geneva based Cie. Financiere Richemont AG) luxury jewelry retailer Tiffany & Co has decided to shut down its Iridesse pearl-jewelry chain after posting disappointing sales figures. The chain was offering cultured pearls within a price range of $100 to $ 50,000.

Whether it is the economic crisis or something else, I felt sad. Pearl has always appealed to me. Unlike diamonds that require painstaking effort like cutting, pearl has a subtle, almost shibumi-like simplicity that translates to beauty. It's maybe because it is nature's own design, with a remarkable journey from deep blue seas to a woman's smooth skin.

From Adamas to Bort

The word diamond comes from the ancient Greek word "adamas" which means "unbreakable, that cannot be tamed". Since its discovery thousands of years ago, diamonds had already lived up to its name as they are considered to be one of the hardest known naturally occurring minerals in the world. The hardness quality of the diamond makes it also an important mineral in industrial applications in addition to its use in jewelry.

Diamond is a material renowned for its unparalleled physical qualities. Because of this, the only material that can scratch a diamond is another diamond. A polished diamond can last a long time and would not be scratched unless it is rubbed against another diamond. The best industrial-strength abrasives were made with diamond dust.

In the industry sector, diamonds of high dispersion index, extreme hardness, and extremely high thermal conductivity with a 900-2320 W/m K are most useful. These properties are the factors that make a diamond exceptionally worthy in industrial applications, it is an ideal material for grinding and cutting tools. Diamonds that are commonly used in industry are the less expensive ones. These include the flawed, the colored, and the unclear diamonds. These industrial-grade diamonds are commonly known as bort.

Jewel Identification and Theft

Because each gemstone is unique when considered with all its variables (cut, color, irregularities, inclusions, refraction, reflection) it is possible to photograph a particular stone and record its measurements and ratings to establish a unique fingerprint that will identify that stone as surely as a serial number.

This procedure is now being carried out on certain stones by certain insurance companies and individuals. The cost factor is prevalent.

Even if a stone is "fingerprinted" and then stolen, there is no centralized source location that every buyer or even every jeweler or gemologist will check before purchasing the stone. This record comes into play more often when a stone is recovered and ownership is in question.

There are some exceptions to this rule. Stones that are of immense value or highly individualistic are put on hot lists. Organizations such as Interpol keep a record and submit copies of printed information along with any suspects' names to various countries' police agencies, and a group called the Jeweler's Security Association puts out bulletins and occasionally flashes to their various members on particularly bold, large or unusual gem thefts.

The criminal counter to this type of record keeping is to immediately remove any stones from their mountings and melt the mountings down for the precious metal they contain. The stone is then sold individually or mixed in with a group of other non-illegal stones and sold in a grouping. As anyone knows, if the stone is held a while, the "hotness" becomes less of a factor in a sale.

Large, unusual or famous stones can be taken to a less than honest cutter, who can cut the stone down into a number of smaller stones. This naturally wastes some of the material as does any cutting procedure and makes the stones intrinsically less valuable as size is a coveted asset in investment quality (or even jewelry quality) gemstones.

In spite of identification and insurance company efforts, jewels still remain one of the most highly sought after targets and any jeweler or diamond cutter realizes he must constantly update his security precautions and it is still probably only a matter of time before he is hit. Insurance rates for these people are fairly substantial as one would imagine.

Refining Rubies

There are a number of ways to treat rubies to improve their color, clarity and ultimately, their value. The quick fix method is to dye or oil the ruby which will help hide fractures, inclusions and improve the color of the stone.

A further refinement of this is a diffusion process where stones are immersed in a chemical bath which contains a number of chemicals including chromium which gives the ruby its color in the first place. This color is carried in the skin of the ruby by the chemicals and actually penetrates the skin. This generally produces a light tone and the tone is only a skin which will disappear upon re-polishing.

The next common treatment is a heat treatment. Rubies stand heat far better than emeralds do and it is fairly common to heat both rubies and sapphires which tends to improve the color by driving out bluish or brownish tints and will tend to dissolve the transparency, lessening the "silk" inclusions on heavily included stones.

These treatments all are dependent upon temperature, time and cooling rate, but they will bring about a permanent change in the stone leaving no chemicals or treatment to be removed.

In top ratings, rubies are rarer than diamonds but the actual supply of top stones may vary greatly because of political situations. Many stones reach the world markets because they have been smuggled out of places (especially Burma) through Thailand and other friendlier countries. There is a fair amount of profit to be made in the smuggling of rubies.

Smaller, included or industrial strength stones, are cheaper than their diamond cousins because they are more easily available.

The rhodolite garnet often approaches ruby in color, although tends to be more purplish than the ruby and less saturated but still are sometimes sold as rubies.

Tourmaline also occurs in many color ranges including red ruby and is sometimes sold as ruby.

A new stone called red spinel has a remarkable resemblance to ruby and is not often seen on the market because it is generally sold as a ruby.

Rubies have been synthesized since the late 1800s. There are two primary methods of synthesizing rubies - the fusion method and the pulling method. In the 1950s, several manufacturers began flux growing rubies which takes considerably longer than the other methods and produces a stone much closer to its natural version.  Flux grown rubies tend to be extremely clear and transparent with an orange overtone.

Fusion stones tend to be strikingly flawless looking while the flux methods may actually produce a number of inclusions resembling silk.

One clue to synthetic rubies is the cut. Because the material is cheaper and waste is not as much a problem, machine cuts such as square or rectangular cuts are more prevalent.

The Tough Gem: Ruby

Ruby is a species of corundum and ranges in color from orange-red to purple-red. It is medium light to very dark in tone and quite strong in saturation. It is a hexagonal crystal that often comes in six-sided prisms, terminated by flat faces.

Ruby registers a 9 on the hardness scale and is quite tough unlike emerald, and not nearly as subject to breakage. Under long wave ultraviolet, a ruby will fluoresce red or orange-red to inert and under short wave should fluoresce moderate red to orange-red.

Rubies come from a number of areas including Burma, which is usually considered as the finest source of rubies in the world. The best Burma stones are medium dark and vivid red.

Thailand produces stones which are a bit dark in tone and range from purple to brownish red because they have a slight bit of iron in them.  Africa (Kenya, Tanzania) produces stones that are normally highly included although reminiscent of Burma in color. Sri Lanka has occasional rubies but more often sapphires that often mask as rubies.

In the U.S.A., North Carolina and Montana produce a few stones. Australia produces fairly poor quality stones as does India and Colombia, Nepal and Pakistan.

Rubies tend to be valued partially by the country of their origin. Some rubies now come with authenticated certificates of origin and the word Burma will bring a characteristically premium price even when considered next to a Thai ruby that may appear identical to the Burma ruby under incandescent light.

Under fluorescent light, the Burma ruby will appear to fluoresce slightly and take on a deeper saturation. This is a highly sought after quality. Burma rubies also have some fine rutile needles that are commonly referred to as "silk" that add rather than detract to the attractiveness of the stone and further establish it as a Burma stone.

In order to establish a country of origin, a certified lab such as the American Gemological Laboratories in New York, has to study the ruby for body color under various conditions, fluorescence and inclusions. If a ruby is certified as a top Burma ruby, the price may be 1 1/2 or twice what it was as an unknown or as a presumed Thai ruby.

Rubies from Thailand tend to have a brownish or purplish overtone. Those from Sri Lanka are generally very pink in color and more correctly referred to as pink sapphire.

Types of Emeralds

Color is a critical factor in emeralds and constitutes about half of the emerald's value (clarity 30% and cut 20%).

• Hue describes the primary color and any other colors in the stone. Most emeralds are green hued with a bluish hue also visible, especially the better Colombian-type emeralds.
• Tone is the depth or darkness of the color as perceived by the eye.
• Saturation is the amount of hue present in any given color.

Depending upon where the emeralds come from, they can exhibit a wide range of color; i.e., Brazilian emeralds are usually lighter toned and less saturated than their Colombian cousins.

The green in the emerald is caused by the trace element of chromium. If the color is very light green, the stone is more correctly referred to as green beryl, not emerald.

Emeralds are often oiled to help their appearance. Normally an uncolored oil such as Merck cedar wood oil is used. The stone may soak in the oil for several days and will actually take the oil in somewhat, helping bring out the color and "wedding" on some of the dry inclusions, making the stone look better.

If one finds an emerald that is mild in color or has a grayish hue, it is a good bet to soak it in oil a couple days and it may regain its green color, not to mention its value.

A more unscrupulous improvement is to use dye or oil with color in it. It is possible to influence the color of a stone by having it soak up colored oil.

Other problems with buying emeralds are the fact that there are a  number of stones that look like emeralds and overlap colors. Tsavorite, a garnet found in Kenya and Tanzania, looks quite a bit like emerald and has a pure green hue, although it tends to be a little bit more yellowish and never has the blue hue of emerald.

Chrome tourmaline is another stone that looks much like an emerald with a moderately strong green color. Another emerald look-alike comes from Africa and is called chrome diopside. All these stones can, and are, sold as emeralds to the unwary.

Different emeralds from different areas tend to have individually shaped inclusions; i.e., slight pyrite inclusions are typical of emeralds from Colombia although they can be seen in stones from other sources.

A three phase inclusion that shows up under a 10x or stronger microscope, which has a distinctly liquid area, a gas bubble in a solid square rock crystal, salt lying superimposed on each other inside a jagged edged cavity, is typical of emeralds from Colombia and proves their natural origin.

Tropic emeralds from Colombia sometime exhibit six fine radiating arms of black carbon inclusions, spoke-like in appearance.  Another type of this stone has six arms of emeralds extending from the center of the crystal with a white shaped wedge area in between. When these stones are cut and mounted, they are valuable because of their inclusions.

Emeralds: The Gentle Gems

Emeralds are a green crystal of beryllium-aluminum silicate. They are hexagonal prismatic crystal with a hardness of 7 1/2 to 8 on the Mohs scale. They are not tough stones and may be broken easily by mishandling or the use of severe chemicals or ultrasonic cleaners. If you own an emerald, be careful of it. Don't wear it during sports. Don't have a jeweler clean it in an ultrasonic cleaner as it may shatter.

Emeralds also break under applications of heat and should never be in a ring that is soldered. Under ultraviolet light they may fluoresce lightly, orange-ish red to red, or they may be inert.

Emeralds come from a number of sources. The best come from Colombia. These are the purest colored and generally the finest stones. The emeralds from Brazil are lighter, have more inclusions and are generally smaller than from other areas. Zambia, Africa, produces some bluish stones and some near-Colombian stones. Zimbabwe is home to a particular emerald known as the sandawana emerald which is generally small with a rich green color. Anything over 1/3 carat is rare.

South Africa produces some low-quality emeralds. Tanzania produces a few very good quality emeralds. Pakistan has just discovered some high-quality emeralds. Afghanistan tends to produce flawed but good colored emeralds. Russia does produce emeralds but doesn't like to let them out of the country.[1] Australia produces some dubious quality emeralds and North Carolina a few gems. Austria and India occasionally produce emeralds.

Emeralds are not unusual as the word emerald simply indicates an extremely nice version of a fairly common stone known as beryl. It is possible to buy something legitimately called an emerald for about $5 a carat. Obviously this is full of flaws, not transparent and so impure in color it looks more like jade than an emerald. They would never be sold in a jewelry store but emeralds do sell on TV and some of the better magazines for $5 per carat.

Gem quality emeralds range anywhere from $400 to $20,000 a carat, depending upon their quality. As the stones get larger, they become increasingly rare and sell for considerably more money.

[1] This is dated; I do not know the exact laws as of today.

How to Avoid Precious Stone Scams

Dealing with small objects of high value such as precious stones, it's not surprising to find there are a number of creative ongoing scams. The most obvious, of course, is simply to sell a less valuable stone in a more valuable rating. We have seen, in the case of diamonds, how even though subjective, a small difference in the rating can make a large difference in the price. Again, never buy mounted stones.

Substitution of less valuable stones is an offshoot of this where colorless topaz may be substituted for diamonds since most stones are colorless and have quite a bit of luster. The specific gravity of the topaz will approach that of a diamond. Of course, it won't pass other tests for a diamond.

Yellow quartz is often substituted for a yellow diamond. Red spinel is often offered for ruby. The worst examples of this occur in areas where the real stones are found.

Natural emeralds sold on the streets of Colombia, Peru and Brazil are often made from the bottoms of 7-Up bottles.

Sometimes diamonds are manipulated by taking a yellow diamond and super polishing it to look white. On occasion oil may be rubbed in to make it whiter.

Burma, India, Ceylon, Brazil, Peru and even Hong Kong and Thailand are notorious places for substitution of non-gem materials in gem sales.

Sometimes cut stones in upper and lower portions are cemented together. This is known as a doublet. It is possible to take two diamonds, the upper portion one and the lower of another and cement them together to create one diamond without the inherent flaws that the opposite piece had before the fusing process.

It is also possible, and is almost as common, to find the upper portion of a doublet is genuine while the lower portion is cut from a comparatively worthless material such as quartz or glass and then glued. If this is done with a great amount of skill, it will have the appearance of a single stone. It is legal to combine things such as diamonds, rubies, and sapphire doublets if they are not sold fraudulently.

The stone may be dropped in water or acetone and if it's a glued doublet, the glue will dissolve and the stone come apart. However, if glass has been used that's been fused to a diamond top, this will have no effect and the fusion must be found by careful, microscopic examination. This fraud is extremely difficult to detect.

A better test is to immerse the stone in a strong, refracting liquid such as methylene iodide. This is diluted until suddenly one part of the stone becomes invisible. This occurs when the refraction index of a liquid is the same as that of the stone and the quartz portion which has a much lower refraction number becomes invisible, leaving the diamond portion visible. This is an indication of a double stone. Indian jewelers are especially known for their production of such doublet stones.

For the extremely naive, it is possible to buy a false doublet. Here the color of the lower portion is imparted to the upper harder portion but neither party may be gem quality. This is when a piece of rock crystal quartz, a rather colorless stone, is used or glued to colored glass or colored stones. In this case, the top part will take on the color of the bottom part, although neither one is a gem stone. Extremely cheap doublets have been passed off by using simple colored gelatin or coloring and quartz or glass and a bit of glue.

Besides these tricks designed to use modified stone, there are scams such as examining a stone or piece of jewelry and having a second made to match and swapping the two. This can be done when someone goes to answer a newspaper ad, does not buy it but takes a picture or impression of it. Then his friend makes the phony and goes to "examine" the piece and switches the new for the old.

It may also be discovered a stone has been replaced with CZ after the piece was left for cleaning or appraisals.

Faked stones mounted in jewelry and then hocked is the oldest game in the world. The perpetrator runs out of money, offers to leave his precious ring as a security until he can get the money he borrows back to the person. The person may or may not skip with the stone, feeling he has the $5,000 ring.

Lab Created Gems

There are a couple of different systems for forming synthetic rubies and emeralds. One is to use a seed chip of the natural stone and then combine chemicals, heat and pressure to "grow" rubies and emeralds. The latest processes are known as flux processes, which combine heat and/or pressure to work on the ingredients composing the gemestone to be synthesized (The ingredients are fairly easy to come by; i.e., carbon for diamonds or beryl for emeralds).

These flux processes are designed to produce richly colored stones and almost always do. They usually have greater clarity than the natural variety although sometimes offer distinguishing inclusions which telltale their origin.

The most famous emeralds are probably Chatham synthetics which grow in a group of crystals. They were first grown in 1935 by Caroll Chatham of San Francisco. The Chatham family still grows these gems but doesn't care to discuss the process. The Chatham emerald sometimes has small spicule inclusions on the face of the facets as a result of the crystal forming solution.

Gilson is another variety of snythetic emerald. There is also a Japanese gentleman by the name of Kazuo Inamora, President of Kyoto Ceramics, who has three showrooms in Japan and one in Beverly Hills selling "created" rubies and emeralds. These created stones have caught on quite well in other countries including Japan and may or many not catch on here. The price difference between the synthetic and the natural stones is quite great.

Once again, we've had experience with Chatham's emeralds and have had a number of gemologists that had great difficulty telling the natural emerald from the Chatham emerald. In many cases, they both would have passed off as natural stones.

Cubic Zirconia

Other than natural diamonds, there is the problem of cubic zirconia or CZ. It is usually sold under a trade name such as Zirconia, Phyanite and Diamonique. Technically, CZ is not a synthetic diamond but it is a crystallization of the chemical zirconium that, when cut, has most of the optical characteristics of a diamond.

CZ is not as hard as a diamond and it does have a different specific gravity. It takes 1.70 carat CZ to equal 1 carat diamond in weight.

CZs, however, in the last few years, have become increasingly close to diamonds and good CZs are impossible to tell from diamonds by the eye. In fact, we had several gemologists look at unmounted CZ and unmounted diamonds, and they admitted they could not tell the difference. The only one who did pick out the CZ with some regularity was because, he said, the stones were too flawless to be diamonds. Hardly a reliable way to judge stones.

As one can see, the potential for fraudulent misuse of CZ is quite high and there have been a number of occasions where people were sold CZ instead of diamonds, turned their diamond rings into unscrupulous jewelers or gemologists, only to have CZ put in the same mountings and returned to them. There have been a number of cases of people looking at diamonds in a jewelry store, and with a quick distraction, replacing the diamond in full view of the jeweler with a CZ and giving that back instead. These will pass on sight.  How do you tell a CZ from a diamond? Well, luckily technology has come to the rescue. There are a number of devices on the market that, for under $150, will electronically test the material to see if it is a diamond or not. Diamonds have unique electrical resistance patterns and CZ have their own. These devices are simply touched to the material in question and will tell if it is a diamond or a CZ. It is a good thing to have on hand if one plans on dealing in gems.

Synthetic Stones or Created Gems

All precious stones have bad name counterparts, some of which are better than others. Synthetic stones (or by the correct name "created gems") are defined by law as "chemically, physically and optically" the same as real gemstones.

They are more expensive than imitation or faux stones which don't have the real characteristics but they're considerably cheaper than natural stones of the same variety. As long ago as in Victorian times, the French were creating synthetic rubies, emeralds and sapphires, which is a surprise to some people who buy estate jewelry thinking it contains a real stone only to find it is a synthetic stone.

Today's methods are definitely more sophisticated and create gems so good that only trained jewelers and gemologists can tell them apart from their natural cousins.

It's possible to create flaws in a created stone although it's more common to see created stones being too flawless or too perfect to be true.

Man made diamonds have existed for years although they have primarily been of industrial quality. Scientists have claimed it is impossible to make gem quality diamonds. This is not true. About 25 years ago General Electric discovered it could make perfect, flawless gem quality diamonds which were impossible to tell from their natural cousins. They decided not to continue the experiment in any mass version because it was "economically unfeasible."

In the 1950's the Soviets discovered a large diamond pipe in Siberia and began producing gem quality diamonds. In 1962 the CSP decided to buy all uncut diamonds produced by the Soviet Union as to allow them to be under De Beers price control. They expected that, based on comparisons with their own mines in South Africa, the Soviets would begin to run out of diamonds in about 1970 and, therefore, they could afford to buy all the diamonds they would produce.

Approximately once a month, a chartered aircraft landed in London and $50,000,000 worth of diamonds were turned over to De Beers Diamond Trading Company for the equivalent hard currency.

De Beers is not very fond of this arrangement but they feel they must do it in order to keep up the diamond prices.

However, an unusual development occurred to the shock of De Beers. The size of the Soviet shipments did not stop in 1970 but rather increased dramatically between 1970 and 1975, besides which the diamonds seemed to be very homogeneous in character, averaging 1/4 carat, flawless with sharp, angular edges and a slight green tint. The Soviet diamonds seemed to be remarkably uniform in size and shape and, unlike their African counterparts, did not come in a multitude of round, square, flat, triangular or twisted shapes but rather mere octahedron.

Coincidentally, the Soviets, under some pressure, have admitted they, with a group of 1200 researchers, developed a way to manufacture a flawless gem quality diamond. This process was officially developed in the 1960's by one Leonid Veres Yagin. The Soviets claim they are not manufacturing these gems but they are natural gems that they keep selling to De Beers.

American agencies, after numerous requests, were finally allowed to visit the Siberian mine and found it hopelessly inadequate in size and facilities to process even more than a fraction of the diamonds the Soviets are showing De Beers. The De Beers insist these diamonds are natural and deny the Soviets have the capability to flood the diamond market with a virtually unlimited supply.

Alternative Identification Methods

Another reliable indicator used is a scale of hardness indicator. As most people realize, diamonds are the hardest stone in the world. The hardness scale normally refers to something called Mohs hardness.

The Mohs scale is a 0 - 10 scale. There is another scale that's 0 -15 making it easier to differentiate between the marginal gems that fall between 9 - 10, but the Mohs scale is primarily in use. Hardness simply refers to the ability of one material to scratch another. Harder material always scratches a softer material. The difficulty in making the scratch or appearance does not come into play. Simply the fact that it can be made.

It should be pointed out that the Mohs scale does not correlate to the relative hardness of the materials. In other words, a diamond is not something that is 10x harder than something that is a 1 on the scale. The scale is simply there to present a basis on which, when a material is scratched, another material can be identified as harder.

Diamonds are a 10 on the hardness scale. Quartz is a 7 on the hardness scale as are most types of tourmaline. Most garnets are 7 1/4 on the scale. Synthetic emerald tends to be 7 1/4 to 7 1/2. Silicon carbide is a 9 1/4 to 9 1/2 on the scale, meaning it will not scratch diamond and diamond will scratch it. Opals begin at 4 1/2 and go up through 5 on the scale while turquoise is 5. Rubies are 9 on the hardness scale.

It is also possible to set a piece of gem material between two Polaroid plates that are set so that no light may be seen between them. The lower plate that the gem sits on is known as a polarizer. The upper plate is the analyzer. The polarizer is fixed but the analyzer is rotated.

If during a complete rotation, the material remains dark with no change, it is called isotropic. If it is non isotropic, it will change from light to dark four times during a complete rotation. The normal non isotropic pattern is a sharp cutoff from light to dark, much as extinguishing a fire. By doing this with a gem, it is possible to establish a refractive index. However, this is a fairly mind boggling exercise and there are easier ways to tell, at least with diamonds.

Single Stone Identification

The odds on finding an uncut diamond, unless one happens to be walking on a patrolled, electrified, mined and guard dog guarded beach in South Africa, are fairly rare (hence, the phrase "blood diamond"). However, uncut diamonds have a number of characteristics that lend ease to their identification.

They normally appear as cloudy, white or slightly colored pebbles with a unique coal, greasy feel to the touch as they are excellent conductors of heat. Natural diamonds can be dipped in water and will not remain "wet". The water does not stick to the surface. These diamonds do, however, stick to common axle grease when passed over them, but most stones will not.

Natural diamonds also occur as crystals and normally have at least one side of the crystal that is flat and appears as a facet. Sometimes more than one side will take on this characteristic.

Positive identification of diamonds or other gems is achieved by a number of more scientific methods. Specific gravity is a good place to start. This concept is very simple. It is based upon the weight of a certain material in relation to the weight in an equal volume of water.

If the material has a specific gravity of four, it will weigh four times as much as with that much water. Specific gravity is usually checked by using weighing scales that allow suspension of the specimen. First it's weighed in air, then it's weighed in water. The weight in water subtracted from the weight in air with the quotient divided into the weight in air. This gives the specific gravity of the material.

Most gem materials have a specific gravity of less than four. If somebody wants an accurate but fairly fast method, he can produce a few heavy liquids and bottle them to suit his needs. There are a number of liquids such as tetrabromo ethane and methylene iodine that will work. The first having a specific rate of 2.95 that can be diluted with kerosene to any gravity one wishes and the second, 3.33. It can be diluted with toluene to produce a series of liquids of certain gravities in between. Leaving the material in question in the bottle, you can tell at a glance if correct and what the specific gravity and the density is.

The specific gravity of diamonds varies slightly depending on where the diamond came from but will fall between 3.50 and 3.53.

Policy Shift in De Beers CSO

Since the company was founded in 1888, De Beers followed a strategy of supply control. In addition to mining its own diamonds, it bought diamonds from other producers and had what it called the "central selling organization," controlling some 90% of the world's diamonds. Its tight control over such a vast amount of supply enabled De Beers to keep prices high for a commodity that is neither particularly scarce nor useful. If a competitor offered diamonds on the market outside of De Beers' central selling organization, De Beers would simply flood the market with similar stones, thus eliminating any pricing power the competitor might offer.

In a recent article in Business Week we read:

By the end of the 1990s, the business model of controlling supply and managing how much of its inventory went to market at any time was no longer effective: New sources of diamonds were discovered in sufficient quantity that they could be sold competitively outside of De Beers' central selling organization. Demand for diamonds was dropping at a time when demand for other luxury goods was increasing. Brand-conscious consumers viewed the stones as anonymous commodities, and the precious stones, long marketed as an emblem of eternal love, became tainted by the phrase "blood diamonds" and came to symbolize the ill-gotten gains of rogue governments.

So, De Beers shifted its strategy from managing supply to driving demand. Under its "Supplier of Choice" program, De Beers had the goals of stimulating diamond demand by 5% per year; improving the efficiency and margins of all De Beers operations, from mining to sales; and leveraging the De Beers brand by offering De Beers-branded jewelry directly to consumers.

Availability and Prices of Diamonds

Diamonds are found literally the world over from black specimens in Brazil to flawless whites in Arkansas. Unquestionably the largest supply of diamonds comes from South Africa where the mines are owned and run by the De Beers family and have been for a number of years. De Beers closely guard both the stones and information about their production.

Diamonds are found typically in a type of formation known as a pipe because of its resemblance to a pipe driven vertically in the ground. The top part of the pipe normally contains yellow earth which contains natural stones which can be fairly easily crumbled and separated out by specific gravity and the fact that diamonds stick to grease. Most stones do not.

Once the yellow earth pushed from the pipe is used up, the second section is known as blue earth. This is a much harder, clay-like material that at first was thought to contain no diamonds and be too hard to crack open because any diamonds inside would be smashed by the cracking process. It was later discovered this clay-like material dries in the sun or under artificial heat to a consistency that allows it to be crumbled. It does contain as many or more stones as the yellow earth section of the pipe does.

De Beers have a unique position, more so than any other firm in any other field of commodities. They literally control the price and availability of diamonds the world over. They do this through something called the Central Selling Organization (CSO). The CSO has controlled the sales of almost all gem quality diamonds in the world until recently.

They allow sales in a unique ceremony known as a sight allocation where upon a De Beers authorized dealer is allowed to buy a certain number of stones they select, wrap and deliver to him at a price they set. This is not an offering but a take-it-or-leave-it situation and if one leaves too many finally De Beer or CSO no longer deals with that particular person. He will no longer be a sight holder. This relationship between the sight holders and the CSO is an instrument to instill fear in the wholesaler who depends upon a single supplier.

The CSO, in order to maintain its level of prices, buys or guarantees to buy all natural diamonds produced in the world. They do this in order to maintain an exact supply and demand ratio they feel is advantageous to the market.

Extra stones are stored in bank vaults, supposedly in London and a few other countries and only marketed when the supply for them increases. De Beers and their organization, the CSO, do not make public exactly how many diamonds are being produced and how many are being released or what the price would fall to if the natural odds of supply and demand took over, rather than the structured sales organization.

Domination by a Beauty So Pure

One of the best examples depicting the obsession and passion for diamonds has been the following text in Ian Fleming's "Diamonds are Forever". Here, M shows James Bond what makes a quality gem:

"Don't push it in. Screw it in," said M impatiently.

James Bond, making a mental note to pass M's dictum on to the Chief of Staff, again picked up the jeweler's glass from the desk where it had fallen and this time managed to fix it securely into the socket of his right eye.

Although it was late July and the room was bright with sunshine, M had switched on his desk light and tilted it so that it shone straight at Bond. Bond picked the brilliant-cut stone up and held it to the light. As he turned it between his fingers, all the colors of the rainbow flashed back at him from its mesh of facets until his eye was tired with the dazzle.

He took out the jeweler's glass and tried to think of something appropriate to say.

M looked at him quizzically. "Fine stone?"

"Wonderful," said Bond. "It must be worth a lot of money."

"A few pounds for the cutting," said M dryly. "It's a bit of quartz. Now then, let's try again." He consulted a list on the desk in front of him and selected a fold of tissue paper, verified the number written on it, unfolded it and pushed it across to Bond.

Bond put the piece of quartz back into its own wrapping and picked up the second sample.

"It's easy for you, Sir," he smiled at M. "You've got the crib." He screwed the glass back into his eye and held the stone, if it was a stone, up to the light.

This time, he thought, there could be no doubt about it. This stone also had the thirty-two facets above and the twenty-four below of the brilliant-cut, and it was also about twenty carats, but what he now held had a heart of blue-white flame, and the infinite colors reflected and refracted from its depths lanced into his eye like needles. With his left hand he picked up the quartz dummy and held it beside the diamond in front of his glass. It was a lifeless chunk of matter, almost opaque beside the dazzling translucence of the diamond, and the rainbow colors he had seen a few minutes before were now coarse and muddy.

Bond put down the piece of quartz and gazed again into the heart of the diamond. Now he could understand the passion that diamonds had inspired through the centuries, the almost sexual love they aroused among those who handled them and cut them and traded in them. It was domination by a beauty so pure that it held a kind of truth, a divine authority before which all other material things turned, like the bit of quartz, to clay. In these few minutes Bond understood the myth of diamonds, and he knew that he would never forget what he had suddenly seen inside the heart of this stone.

The Need for Appraisals

Reasons for getting an accredited appraisal are having the stone you want insured, or when you go to sell the stone, having an appraisal that verifies the stone's quality to an unsophisticated buyer and that lists the price considerably higher than you actually expect to get for the stone, which may help sell the stone.

This is a nice line of thinking as long as you are the seller and not the buyer. It is a buyer beware type of business and you should know what you're getting and should take all safeguards possible to insure you're getting what you think you are. If you're buying in a slightly dubious situation and perhaps are not as concerned with the stone's pedigree as some people would be, you should be prepared to never see the seller again and live or die on your evaluation of the stone, not a piece of paper from an appraiser.

It should also be pointed out that in certain situations one would not want to take a stone in to an appraiser. I will leave this to the imagination of the reader.

Although appraisals are intended for an insurance company's benefit, one should realize that if an insured stone is stolen or otherwise destroyed, the insurance company may want additional information regarding the purchase of the stone along with an independent appraisal. There are exceptions to this rule. If this stone was a gift or was left to one in an estate, obviously an appraisal becomes the primary instrument of value determination and, as such, is extremely useful to have on hand.

As a sidebar here, there are ways of destroying or damaging a diamond, even though a diamond is one of the hardest materials known to man. As previously pointed out, they are brittle. If you strike a diamond with a hammer, you'll dissolve it into useless industrial dust. If you touch a diamond to an acetylene torch of significant temperature, you will observe an extremely interesting and costly phenomenon where the diamond turns back into the same black carbon that it came from.

Graphite, in other words. Once this happens the only recourse is to hope the diamond was large enough to burn in the furnace and get some heat because there is no way of changing it back quite as readily to its crystalline form.

Diamond Prices and Appraisals

Wholesalers and for that matter, diamond retailers, buy their diamonds on a per carat basis and if you are going to buy from anyone in the business, you should consider the stone in that same light.

It is practically impossible to quote diamond prices in a paper like this because they are subject to change and market fluctuations. Retail diamond prices are also subject to seasonal conditions and one will find that holidays and gift giving times such as Christmas tend to bring about severe prices from retail outlets while the spring and summer months will often evoke a more favorable estimate from a retailer who needs to make his rent that month.

Wholesale diamond prices should not change too much due to seasons or gift giving times. Wholesale prices will vary when the market demands exceed supply and also tend, as with gold, to function somewhat independently and opposite of "soft" currency such as the dollar.

The price one pays is determined by how much the seller wants to sell the stone and how much the buyer wants to buy it. Obviously in certain situations, stones are cheaper than they would be in a high markup area such as with a retail jeweler.

A stone may come with an appraisal sheet from one of the two gemological societies recognized in America. This sheet, as we have seen, details a number of qualities about the stone and will establish an appraised price. A couple things one should be aware of about appraisals; the first is that they're invalid generally.

Appraisals are an instrument designed for insurance companies to establish a possible price on a diamond that includes a number of factors such as increase in value during ownership. The appraisal sheet will be inflated over the value of the diamond. One never expects to pay full appraisal price for a diamond and if one does, the term "saw you coming" falls quite aptly into place.

Appraisals also vary from person to person even with accredited gemologists. The same stone can bring about two entirely separate appraisals that may differ in value by hundreds or even thousands of dollars. Again, the appraisal is a piece of paper that allows the insurance company to set a value on the stone, not that the insurance company will necessarily pay off the appraisal at full price either.

One cannot make a living by buying diamonds, having them appraised and then reporting them to the insurance company for too long.

Appraisals, on a very general basis, tend to be nearly double the price that a stone will actually sell for. This is a very wide statement and some appraisals will, of course, be closer to the actual value of the stone than will others.

Appraisals cost money and if you are good enough to sell the qualities of the stone after a little bit of practice, your own word and your own peace of mind will be more valid than a piece of paper.  You are buying a piece of paper that someone else may not want to buy.

One should actually consider that one is buying the stone, not a piece of paper telling one how valuable the stone is. This could be compared to buying a car because the owner wrote an article about how exciting the car was. Needless to say one should base the actual purchase price on the vehicle itself.

Carat Weight in Grading Diamonds

The fourth and final C in evaluating a diamond for purchase is the carat weight. The term carat is a reference to biblical times when diamonds were compared against a carob bean because carob beans tend to have a uniform size and weight. One carob bean became the equivalent of one carat. The carat is still the primary unit of diamond weight used today. However, a carat is further broken down into 100 sub units called points. One point equals 1/100 of a carat.

When you buy diamonds it is often mentally economical to break the price of the stone down to a per carat basis. A rather crude example would be if you were buying drugs you would break the price of a kilo down into a gram weight to establish what you are actually paying per unit. The same is true in diamonds. You should divide the weight of the diamond into the price to get the carat weight.

The next thing to realize is that carat weights do not follow a linear progression in terms of price. There are certain man-made break points in diamond pricing. The first break is at .50 (1/2) of a carat. The second break is at 1 carat and then succeeding breaks occur at each carat thereafter.

These breaks, although arbitrary, are valid and a diamond that is .52 of a carat will cost considerably more than a diamond that is .44 of a carat. A diamond that is over 1 carat, say 1.03 carats, will cost considerably more per point or per carat than would a diamond that is .94. Because this break is so critical, one should always see a diamond weighed in front of one on a scale that has been verified by using an accurate unit of measure. In other words, put a one gram weight on the scale and see if it actually reads one gram.

Because of the price involved, these break points are quite important and one does not want to pay the price differential for over a 1 carat diamond for one that's actually a couple points under. When it comes time for resale, the next buyer will not be so generous in his consideration of the weight.

These price breaks are very substantial and are one of the few things in diamond selling that is not subjective. As such they are quite evident in all diamond sales. The difference per carat weight in a diamond that weighs from 1 to 2 carats may be as much as $1,000 per carat or more, on a 2 to 3 carat diamond. This holds true on a 3 to 4 carat diamond also. One could expect to pay not $1,000 more but $1,000 per carat more. This tends to increase as one gets into the heavier weights and good grades of stones because the stones become much rarer. It is much easier to find small good stones than it is to find large stones of the same quality.