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How is Diamond Price Calculated?

Determine the 'fifth C': Calculate Diamond Cost

Imagine that you have just pulled over a grand event of the evening in your best satin gown and the most brilliant and prettiest diamond necklace. As you make your way through the evening, getting showers of compliments for your impeccable dressing and accessorizing taste, you come to know that your necklace studded with diamonds is not as pretty as some other guest's jewellery. Now, that's half the issue. With an evening filled with elite guests, you will get to hear that they did not even pay for their accessory as much as you did.

Yes, that is possible. The cost of a diamond depends on quite several factors, and if you're not careful, you might end up overpaying for lower grade diamond. This guide will assist in gathering up all the information about how the price of a diamond is calculated, and what must you focus on while paying for diamond jewellery.

Pricing Structure of the Diamonds

Let us start with a simple concept: the pricing of gold. Now, you know that gold price is based on its availability, market demand, karat, and wastage/making charges. It is as simple as that. But the price of a diamond is calculated quite differently than gold and other precious metals. In the case of diamond cost, the rough, uncut stones are priced at a different value compared to the polished and cut stones.

If you take the example of a global-wide free market, then the price of diamond would be inversely proportional to the demand; higher the market demand, lower the cost of the diamond. However, diamonds are not controlled by the free market; they are controlled by the giant cartels, such as De Beers, which decides and sets the diamond's price.

How Do a Few Cartels Control the Price of Diamonds?

Let's look at history. De Beers was founded by Cecil Rhodes in 1888, and they used to control more than 80% of rough diamond trade and usage during that time. Eventually, other companies, such as ALROSA and Rio Tinto chimed in the diamond business, taking the hold from De Beers. However, even to this date, De Beers has a hold of more than 35% of the world's diamond. Thus, these companies determine the worth of the diamond and its price.

In simple terms, De Beers and other major cartels working in the diamond industry control the stone's price by controlling the flow or availability of the stone in the market. They have complete control over the mining, processing, marketing, and delivery of the rough diamond stones to the retailers and the companies.

But you don't need to know the business intricacies. You just need to know if you're overpaying for your diamond ring or not. 

The Price of Diamond for You

Here come the real answers to all your questions regarding diamond price.

Diamond cost is set based on the international market, same like gold

While the gold price is the same for every ounce/gram, the cost of the diamond is determined by its grading

Along with the 4Cs of the diamond, several other factors influence the diamond costs, such as their market demand, supply, retailer's expense, and trading

Finally, the cost of a diamond set by the retailers are based on the Rapport Report or 'rap list' that was established in 1976 to provide price benchmark to different shape, colour, and cut stones

The rap list is updated monthly for retailers to fix their diamond price for the colourless stones of different clarity and cut

But the Rapport report does not adjust for the cut of the diamond. It only focuses on the colour, clarity, and carat of the stone

Diamond Price Based on the 4Cs

We would recommend that you first go through our guide that explains the 4Cs of diamonds. It would be easy to understand how the cost of the diamond is calculated based on these four factors.

Diamond clarity

The clarity grade takes into account several elements before finalizing the diamond's price: the location, stone size, type, and the number of irregularities.

Undoubtedly, the higher grade diamonds cost more as they possess more brilliance and sparkle and fewer blemishes/inclusions. If you buy a diamond ranging in the grade scale between VSI to SI, then you're likely to pay more for that jewellery item. Take for example a diamond stone that has more inclusions than another stone, but if the former's irregularities are invisible to the naked eye, it may scale higher on the grade but still have a lower cost.

Diamond shape/cut

The cut of the diamond determines its brilliance and sparkle, thus its price. Additionally, the shape of the stone impacts the diamond jewellery cost based on its popularity as well. For instance, round cut stones and solitaire diamonds are priced more than other diamond shapes. Even the wastage of rough diamond as they are cut into specific shapes influence the cost.

Diamond colour

Again, the more colourless a diamond, the higher its price. On the colour grade scale, a diamond with a score of G to M is perfect for buying as their tints are almost invisible to the naked eye. They cost less than the stones that are graded between D to F. Diamond stones with yellowish or greyish tint are also perfect for giving your jewellery an antique look without shelling out much money. 

The phenomenon of fluorescence also impacts the diamond cost. Fluorescence is how your diamond would react under the UV light. Most of the stones emit soft, light blue light under UV, but stones with high fluorescence produce a milky white effect to the stone. Usually, fluorescence in the stones of grade D to F decreases its value, while the same effect increases the price of stone in the grade G to J.

Diamond carat

Naturally, the more the weight, the higher the price. But carat alone cannot determine the final value of the diamond stone. All the 4Cs together can only fix the stone's worth.

After Service Customer Support

We know that jewellery is not an electronics item that requires regular updates or maintenance. However, keeping the accessory clean and shiny is still essential for any jewellery lover. The after service customer support can include:

  • Frequent cleaning and polishing services
  • Fitting services, such as a gold bangle ring resize
  • Exchange services for jewellery items That Deteriorate or lose Their shine before the warranty
  • Re-sell options for every customer for their item

Even the name of a brand influences the diamond's price. So, if you're thinking of buying a diamond jewellery design that belongs to a world-reputed brand, then gets ready to pay more.

You can also explore gold coins with price for more investment options.