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How Are Diamond Prices Calculated?

How Are Diamond Prices Calculated?

Diamond prices are kind of a complicated ordeal. The old saying says that you need to spend at least two paychecks on your engagement ring, but are the actual rules for these precious crystals, and how are they priced?

Well, as it turns out, there is a set of rules that you can generally follow, but it may not be as straightforward as some would like.

See, diamonds are priced based on a lot of things. Having a certification is always a good start, but even that will only get you so far because you still need to get a good deal!

The certification paper is a factor when the diamond is priced. The gems can go through the hands of multiple professionals before getting a price tag. 

We know it sounds complicated, but don’t worry; we’re here to clear everything up! 

What Factors Go Into The Price Of A Diamond?

Okay, so how are diamonds priced? They go through a couple of steps before getting sold, some are more crucial than others, but they all have to be considered for it to get priced.

Now diamond prices can go up and down, so even if a diamond gets prices at a specific number, there’s no guarantee that it won’t fluctuate with whatever the economy is dining at that moment. 

But we’re getting ahead of ourselves. Let’s look at all of the factors that matter before the diamond hits the market! 

Quality – The 4Cs

How the market behaves at a particular time can affect the price of a diamond (or diamonds in general). Still, the quality of said diamond depends on four things: its carat weight, the cut, color, and clarity grades. These four factors are called the 4Cs in the industry.

This system usually evaluates all diamonds to get a proper and fair price tag. All four impact the final price, but if there’s one that matters above the other three – it’s the weight! 

1. Carat Weight

The weight of a diamond is the first thing checked when it’s just been dug up in the mine. The weight can only go down afterward, as the diamond is cut and sometimes split into multiple pieces. It’s simple if you have two diamonds cut in the same way with identical color grades, but one is larger than the other – the heavier stone get’s you a heftier price tag. 

So what does the word “Carat” do in the whole equation? Well, it’s a unit of measurement used to weigh diamonds. A Carat equals one-fifth of a gram. So if you were to have a gem that weighs 1 gram, it would be written down as a 5 Carat diamond

Related Read: Can You Measure Diamond Weight In Grams?

2. Cut Grade

A cut grade is traditionally the last thing a professional will look at, and it can make or break the price that the other Cs managed to rack up! 

There are many shapes of diamond that we’ve seen throughout the years, and they usually depend on trends or a few classic shapes that never go out of style. But no matter what style the person who cut the gem chose, it’s more about the skill they managed to put into the cutting than the shape itself. A poor cut grade will upset all of the other things that the diamond has going for it. 

But let’s say we’re looking at a well-cut diamond; what factor comes into play here? Well, there are three main ones : 

  • Brightness – The brightness level refers to the amount of light that a diamond can manage to reflect and bounce back outside of itself. 
  • Fire – The term “Fire” refers to how white light scatters on the inside of the diamond. High-graded diamonds will usually appear to create a rainbow on the inside, and it’s usually a great sign to see one holding the diamond up against a light source. 
  • Scintillation – This refers to the AMOUNT of light that manages to scatter on the inside. It focuses on the amount of light, not the quality of the reflection.

3. Color Grade

Next up on our list is the color grade. When you imagine a perfect diamond, what does it look like? There are plenty of things that come to mind, but one of the first ones is probably the clear, clean, crystal white color.

It’s not even a white color; it’s more along the lines of being completely colorless! That image that you’re seeing right now is pretty much what’s sought after in the highest quality diamonds. 

Diamonds are translucent; light passes through them. So the cleaner the diamond, the less color will appear. What would cause a diamond to get an impure yellow hue? 

If the light hits cuts, blemishes, and spots while passing through the material, it will appear as if it’s yellowish once it comes out and hits your eyes. There’s a rating (or grade) to the color that a diamond gets while it’s getting priced – It’s called the DHNZ rating. Here’s how it works : 

  • D – A completely colorless and translucent diamond.
  • H – A translucent diamond that contains a low amount of imperfections, mainly on the inside.  
  • N – A diamond with imperfections on the inside and out that are visible to the eye. 
  • Z – The Z rating is used for diamonds with a yellow color. They can be translucent but are not by any means considered colorless.

Related Read: Diamond Color Vs. Clarity: What’s More Important?

4. Diamond Clarity 

Keeping in line with the imperfections inside and outside the diamonds, we go to the final grade; the clarity!

If a diamond is perfectly clear, it gets a high clarity grade; that much is obvious. But what might not be so obvious is how the imperfections discovered on the diamond affect that grade. Well, there are a couple of kinds of these imperfections; let us explain: 

A diamond can have two imperfections as far as its clarity grade goes: blemishes and inclusions. So what’s the difference between the two? 

  • Blemishes – these are imperfections found on the diamond’s surface. They lower the grade for a simple reason – making it hard for the light to get it! Surface blemishes are the faults that can be viewed by the human eye, which means that the diamond loses points as soon as you lay your eyes on it! 
  • Inclusions – these are faults found on the inside of the diamond. They might not be visible at first glance as clear imperfections, but by being there, they affect the color and the reflections of light on the inside. 

Read More: Can You Remove Inclusions From a Diamond?

Here’s the actual rating that the diamonds get (clearest to most flawed): FL (flawless), IF (Internally Flawless), VVS/VVS2 (very, very slightly included), VS1/VS2 (very slightly included), and SI1/SI2 (slightly included).

Diamond Certification

Having a diamond certification helps with getting it appraised, but is there a specific certification worth more than others? Absolutely! 

One of the most important institutions a diamond can get certified by is the Gemological Institute of America (GIA). The 4C grading system was introduced by GIA back in 2005. They are the most recognized institutions where you can get your diamonds graded, and many people do! 

It is pretty much a standard practice in the industry to send your diamonds to GIA to get an official grading report that you can then use to help appraise your diamonds. Notice that we said help – that’s because GIA doesn’t appraise diamonds; they just grade them.

But don’t think that makes their grading reports any less significant; it’s pretty much the most critical factor in an appraisal. GIA-graded diamonds are usually found in special categories in most jewelry stores or websites.

Learn More:

Calculating The Price

Alright, so now that we know about the 4Cs of diamond grading and we got the certification from a respectable institute, how will we price the diamond? What is the calculation we need to do to get the diamonds appraised?

Well, this is where it gets a bit complicated again. See, diamond prices vary, and they vary a LOT. Two 1-carat diamonds can have upwards of a $15000 price difference between them! And the more we go up in carat weight; the more significant the differences can be.

This is because it all depends on the 4Cs. If the diamond is exceptionally well cut and without imperfections in its clarity, it can cost tens of thousands more than a poorly cut diamond of the same carat weight. 

But don’t worry, this is what the certifications are for! So, we just need to take all of this into consideration. There are plenty of diamond calculators online that you can find, but you might notice that they won’t all give you the same results. There’s a good reason for this.

See, these calculators base their prices on a specific diamond seller. There are plenty of those that use the same seller, sure, but you will still need to account for at least slight variations. The two that are most often used are James Allen and the Blue Nile, as they are industry leaders and have been for quite some time now. 

Related Read: How Do I Value My Diamond? Identifying The Diamond Quality

Here are all of the elements that the equation needs::

  • The shape of the diamond – Ten shapes are taken into consideration when appraising a diamond: Round Brilliant, Princess, Cushion, Emerald Cut, Oval, Radiant, Asscher, Marquise, Heart Shape, Pear Shape.
  • Carat weight – Consider several gems with similar clarity, color, and excellent cut. The price of the diamond proportionally increases with carat weight.
  • Color – The usual color grading system used is GIA’s DHNZ system. Other more nuanced grades can be used at times, but it’s not the norm yet.
  • Clarity – The grading system used here is the one we mentioned above: FL, IF, VVS1, VS1, VS2, SI1, SI2.
  • Cut Grade – No matter what shape the diamond might be cut to, the cut grade is what makes or breaks the look. The GIA cut grade is usually what’s looked at for guidance. There are three grades: Excellent, Very Good, and Good. 
  • Fluorescence – A diamond can achieve five fluorescence grades: None, Faith, Medium, Strong, and +Strong.

If a diamond has been professionally graded in all of these categories, you will be able to get a price for it. Sure, one can get a diamond appraised without a certificate, but there are risks. 

In most cases where a diamond is sold without certification, it will get sold for a much lower price than it would have after it’s been graded. But the thing is that that’s really not common practice, especially these days. There are plenty of companies that do all that we mentioned here so that you don’t have to. With that said, buying an ungraded diamond with no certification papers for large sums of money is a huge risk, to say the least! 

Learn More: What Is The Difference Between Certified And Non-certified Diamonds?

Calculating Per Carat

You’ll sometimes hear the phrase “per carat” getting used in the industry – so what does it mean? Remember what we said that a carat was in the first place? It’s a unit of measurement, and pricing a diamond “per carat” just means that its value is based on its weight before all else. 

Now, does that mean that the other Cs aren’t looked at? Absolutely not! It means that you’re looking at the price based on some established value per carat. For instance, if you have a 0.50-carat diamond with a price tag of $2500 per carat. Calculating its price is done by multiplying the two numbers. So $2500 * 0.50 = $1250 – and voila! The price of your diamond is 1250 dollars.

One thing to note is that diamond prices go up exponentially per carat. The higher the carat weight is, the more we pay.

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So, How to Put a Price Tag on Diamonds?

So there we are! We know that it might still all sound a bit confusing, especially since there is no real way for you to sit at your dining room table with a calculator, add up a few numbers, and appraise an inherited family diamond that you just found. 

At the end of the day, the best way to get an idea of the value of diamonds is just to research respectable diamond sellers! So if you do that, and you have all the necessary certification papers, etc., you’ll be able to get an approximate number! 

The one thing that we already mentioned that needs repeating is that diamond prices react to inflation. When it goes up, so do diamond prices! So even if you have the most detailed research from, say, ten years ago, you’ll probably just have to do it all over again.

So what’s our advice? It’s simple – leave it to the professionals!

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