Diamond Articles

Why Are Diamonds So Expensive?

August 29, 2019 - Diamond Articles
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Whether you are a long-time diamond lover or thinking about buying your first sparkling gemstone, you might have wondered: why are diamonds so expensive?

Anyone who has stepped into a jewellery store can tell you that even the tiniest diamond can come with an outstanding price tag. From their journey from diamond mines to jewellery stores, we will show you how diamonds rack up their high prices as well as where to buy diamonds at affordable prices.

 

Get answers to the following questions:

 

why diamonds are expensive

 

Why are diamonds so expensive?

Is it clever marketing campaigns, or high demand and dwindling supply of diamonds that drive prices up? To understand why diamonds are so expensive, we need to follow their journey from mine to store.

 

Mining

Mining is an incredibly resource heavy, time consuming and destructive process. According to the United States Geological Survey (USGS), the average diamond in an engagement ring requires the removal of 200 to 400 million times its size in earth. With about 133 million carats of rough diamonds are produced each year, that is a staggering amount of earth removed to extract a finite number of diamonds.  In fact, it is the equivalent of filling the Rose Bowl Stadium with dirt – 34,000 times!

According to the Better Diamond Initiative one carat of mined diamonds results in:

  • 3.10 tons of earth displacement (just 1,600 Rose Bowl Stadium filled with dirt!)
  • 0.056 C02e tons of greenhouse gas emissions
  • 8.9 liters of fuel
  • 0.34 GJ of energy use consumption
  • 2,534.87 liters of water use

To counteract this environmental damage, members of the Diamond Producers Association (DPA), such as the De Beers Group, Rio Tinto, Lucara Diamond, dedicate about £5.5 billion annually towards conservation efforts for their mining communities. DPA members partner with local governments to manage the environment, build infrastructure and help local businesses flourish.

Why are Diamonds so Expensive

Diamond markups

After a diamond is mined, it can go through three or more “middle men” who each increase the diamond’s price in order to make a profit. This chain of mark-ups, over and above the cost of the natural resource, results in consumers having to pay high prices for diamonds at jewellery stores.

Below is an example of the price mark up at the four different stages (example prices to illustrate markups):

  1. A diamond miner sells a diamond to a diamond manufacturer for £100
  2. A diamond manufacturer sells the diamond to a diamond dealer for £125
  3. A diamond dealer sells the diamond to a retailer for £150
  4. A retailer sells the diamond to a consumer for £300

 

The diamond we followed from the mine to the jewellery store would likely have ended up with a 300% mark-up from the miner’s cost. The exact mark-up that gets passed onto your diamond largely depends on where you bought it and the exact markups along the way.

For instance, brick and mortar jewellery stores place greater mark-ups on their diamonds than most online stores. Physical jewellery stores do this to cover operational costs, such as paying bills and staff, as well as slow moving inventory.

 

How much is my diamond worth?

Regardless of how long you have had it for, you will be selling your pre-owned diamond at a lower price than what it was originally bought for. This is due to the markups incurred along the way, and additionally it may need to be recut and/or re-certified before the diamond can be sold to the public again.

Why are Diamonds so Expensive

The value of your diamond is based on the 4C’s, globally used diamond grading criteria:

  • Carat Weight: How much your diamond weighs, commonly abbreviated to ct. The higher the carat weight, the more valuable the stone.
  • Clarity Grade: The amount of internal and external marks in your diamond, referred to as inclusions and blemishes. Clarity is graded on a scale from FL, for flawless diamonds, to I3, for eye visible flaws. A high clarity grade is more valuable.
  • Colour Grade: How much colour is present in your diamond on a scale of D (colourless) to Z (light yellow). The less colour, the more valuable the stone. This grade only applies to white diamonds, while fancy coloured diamonds, such as fancy blue, are graded from Fancy Light to Fancy Vivid depending on their colour intensity.
  • Cut Grade: How well cut and proportionate your diamond is on a scale from Excellent to Poor. Cut grade only applies to round diamonds, while fancy shapes, such as ovals and hearts, do not have official cut grades.

 

When you purchased your diamond it likely came with certification from a diamond grading lab, such as the GIA. This report will detail the 4C’s of your diamond as well as other useful information such as its fluoresce and symmetry that also impact price. If you do not have any paperwork for your diamond, you can meet with a local jeweller to get a verbal appraisal of your diamond’s characteristics.

 

How to buy affordable diamonds

Looking to buy diamonds or diamond jewellery for the best price? Here are our top 3 tips:

1. Pre-owned diamonds: When it comes to buying affordable and high-quality diamonds, it makes sense to buy pre-owned. Not only are recycled diamonds an eco-friendly and sustainable purchase, as they reduce the demand for mining and the negative impact that this has on the environment, but pre-owned diamonds are also more affordable.

By buying second-hand you are eliminating much of the markups and yet not compromising on the quality of the stone. Our partner, myGemma, sells pre-owned diamonds and diamond jewellery of all shapes and sizes at deep discounts.

2. Trade in old jewellery: To make your perfect diamond even more affordable, sell diamonds, designer jewellery and luxury watches to WP Diamonds and we can provide a cash offer to put towards a new purchase OR receive 10% more on your offer in the form of myGemma (store prices exclude VAT).

3. Affordable payment plan: myGemma also provides affordable monthly payment plans on a variety of pieces through Affirm.

 

what makes diamonds expensive

 

How to sell diamonds

WP Diamonds provides a modern and streamlined solution to selling diamonds, designer jewellery and luxury watches. Selling to WP Diamonds is so simple and fast that the entire process can take as little as 24 hours. Our trustworthy selling process has earned us hundreds of excellent reviews from satisfied customers.

 

How it works:

  1. Complete our online form 
  2. Our experts will contact you with a price quote
  3. Schedule a free appointment at one of our offices in Birmingham, London, New York, Tokyo or Hong Kong or request a free and fully insured shipping
  4. Our experts will provide you with our final offer. There are never any hidden fees or commissions deducted from your price so the final price we tell you is exactly how much you will be paid

Author
Bio: Written by one of our diamond, designer jewelry or luxury watch experts. With over 150 years of combined experience, our experts are able to comment on trends, share industry knowledge and provide diamond, designer jewelry and luxury watch education.

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