Why Are Diamonds So Expensive?

Why Are Diamonds So Expensive?
 
 
 
 

What makes diamonds so expensive? Is it their rarity? What about their desirability? Are they expensive to mine, or do they cost a lot to bring to market? Why are diamonds so expensive no matter where you are or what time of year it is? The truth is that a combination of factors keeps the value of diamonds high. We’ll look into each of them to see how they help determine the price of diamonds, and we’ll consider a few other factors, including the season you buy them in.

Seasonality

There’s no season for bridal jewelry because people propose all year round, but factors influence the natural supply and demand ratio, and they come around from time to time. Again, they’re not seasonal, so there’s no need to wait if you’re considering investing in a massive stone, but two events can impact diamond prices. If you’re buying diamonds in India, Diwali has an impact. Diamond manufacturers in Surat stop production for between 30 and 45 days, so the pre-Diwali market has more quantity than you’ll find post-Diwali. That’s a regional and seasonal issue. The other event to consider is not.

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Mining Companies

Diamond manufacturers get a large number of their uncut diamonds from mining companies. As you’d imagine from any mining operation, there’s no steady stream of diamonds produced from their efforts. That means output can increase sharply at times. There’s no way to predict this unless you’re in the know, but when output increases, there’s more supply than the demand, so the prices fall. We’re not suggesting a massive crash in the value of diamonds, but a significant enough change for a noticeable difference if you’re buying in large quantities.

Pricing

Buying diamonds is hard to understand unless you have some knowledge. You can buy a two-carat diamond from the same manufacturer at wildly different prices. How can that be when diamonds are based on their carat? We think of and discuss diamonds using their carat size to describe them, but that’s not the only factor that determines their price. Their shape is also important. The round brilliant cut is the most expensive cut you can get. This shape intensifies the diamond’s sparkle and its ability to reflect light. The quality of the diamond is also a major factor. A diamond’s clarity and color also help determine the price.

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Certification

Certification is a factor that adds cost to diamonds. It’s an absolute must for anyone spending more than $1,000 on the stone. As you’d imagine, certification provides peace of mind for the consumer, but it also adds cost to the sale process. The gold standard for certification and the only certificates you should look for show the diamond came from GIA and AGS laboratories.

Final Word

Unlike precious metals, there’s no universal market price per carat. That means the cost of diamonds as precious stones is based on supply and demand. With the advent of lab-created diamonds, some demand has dropped, but nothing like the real thing.

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