To understand why diamonds are so expensive, we need to trace them from mine to retail store.
Mining is a very resource-intensive, time-consuming and destructive process. According to a study by United States Geological Survey (USGS), to produce an engagement ring, average diamond must remove ore equivalent to 200 to 400 million times its volume. Rough diamonds are 133 million carats per year. to extract a limited amount of diamonds, a staggering amount of soil must be removed. In fact, amount of land removed each year is equivalent to filling Rose Bowl stadium in Los Angeles, USA, 34,000 times.
According to Better Diamond Initiative, every carat of diamond mined brings:
Due to environmental damage caused by diamond mining, Diamond Producers Association (DPA) members such as De Beers Group, Rio Tinto, Lucara Diamonds of Canada protection and restoration of environment in mining areas. DPA members work closely with local governments to improve environment, take infrastructural measures and help local businesses thrive.
When a diamond is mined, it goes through three or more "middlemen" who incrementally increase price of diamond in order to make a profit. This value chain pushes diamonds far beyond their value as a natural resource, leading to consumers ending up buying diamonds at exorbitant prices from jewelry stores.
The following is an example of a gradual increase in price of diamonds after 4 different stages (just as an example to illustrate price increase process):
- Diamond miner sold a diamond to a diamond manufacturer for £100;
- A diamond manufacturer then sold diamond to a diamond merchant for £125.
- Diamond dealer sold another diamond to a retailer for £150; The
- Seller sold diamond to buyer for £300.
It can be seen that same diamond, having gone through resale stage from a diamond mine to a jewelry store, can end up costing 300% more than its original cost. How much price of a diamond increases depends on where you buy diamond and markups in process. Regular jewelry stores, for example, often charge higher prices because operating costs include bills, staff salaries, and slow inventory handling.How much is my diamond worth?
Now that you know why diamonds cost so much, you should also be wondering how much your diamond is worth. No matter how long you own it, you are bound to pay less than when you bought it. This is because price of polished diamonds has risen during release process and some diamonds need to be cut and processed before they are released to market, which adds to their value.
Diamonds are graded on 4C scale, global diamond rating. 4C include:
When you buy diamonds, most of them come with a diamond certificate issued by a reputable organization such as GIA to test quality of diamond. The certificate will detail grade of 4C diamond, as well as other useful information such as fluorescence, symmetry, etc., which will also affect price of the diamond.