Diamond Trust

So you might have noticed that the platinum spot price is only around 15% more than gold at the moment, so does that mean the buyer is entitled to a cheaper ring setting?  The price of platinum bombed in mind-2008 from around US$2,000 an ounce and is currently hovering around US$1,100 - that’s a 45% drop!

To compound this, around June last year the Australian Dollar was almost at parity with the US Dollar, so you’d be right in expecting a saving of 60%, right?  Well, the reality is I doubt most jewellers crunched the numbers quickly enough and even fewer would have passed on the savings as they were holding old stock bought a while back.

Anyway, none of that really mattered because come October 2008 the AUD fell back below 0.70 and hasn’t really been north of it since.  Add the increased pressure of slower sales for jewellers and you would be lucky not to get a price increase at the moment!

If you’re looking to buy a diamond and thought of buying something locally produced in Australia, what are your options?  Unfortunately, your option are limited.  According to Wiki, there are only three diamond mines in Australia and only one has been branded, Arygle.

Argyle diamonds

You’ve probably heard of the Argyle diamond mine which most associate with pink diamonds.  Here are some statistics I found about what kind of loose stones come out of the Kimberley region:

• In 2007, it was the 8th largest producer of rough diamond in carat weight volume
• only 5% of the rough is gem quality (average around the world is 20%)
• 2% are white diamonds
• 1% are pink diamonds
• 80% are brown (yuck!)

Personally, I think pink diamonds are overpriced and overrated.  So are the white diamonds worth it?  I would say not.  Their mine generally produces low quality rough and according to those statistics, they only mine twice as much white as pink diamonds which are stupidly expensive.  I’m not sure you’re going to get much value out of Kimberley diamonds compared to other options open to a diamond buyer.

CanadaMark diamonds

So what’s “plan B”?  Well, where I used to work we stocked CanadaMark diamonds.  I know what you’re thinking, this post is about Australian diamonds, what do Canadian Diamonds have to do with it?  Well, CanadaMark diamonds are mined out of the BHP Biliton owned EKATI Diamond Mine in the Northwest Territories of Canada.

And in case you didn’t know, BHP is referred to as The Big Australian.  So my logic is that you’re indirectly buying Australian, that makes sense right?  Just nod and smile..

So what makes EKATI better than Argyle?  In contrast, 80% of production is gem quality and I’ve personally seen at least a hundred of these stones and the average cut and symmetry is impressive.  There are many branded stones out there, but this one seems to be the only one worth buying with an Australian link.

One thing we noticed in jewellery retail was that some people came into our store just to convince themselves buying online was better.  Sometimes they changed their mind and bought from us, but most of the time I think they had already made up their mind that they wanted to buy a diamond online and that’s cool - each to their own.

So why should you trust what I have to say?  It’s true, I’ve never bought a diamond before, but I have sold them from leads that were generated online so I can empathise with what is going through the buyer’s mind, or maybe more important, what should be going through their mind.

So what would a smart diamond buyer do before commiting to buying a loose stone?

Research the 4Cs (Cut, Carat Weight, Colour, Clarity)

This blog is focused more on the consumer issues-  pricing and value.  Learn a few basics about how cut affects the brilliance, colour the whiteness, etc. and how they all play a part in not only the beauty of the stone but also the price of the diamond.

Buy diamonds in Australia

Or wherever you live if that’s not Australia.  You’re going to save yourself the hassle of shipping internationally which involves customs, parcels lost in transit, insurance, GST and duties.  Also, you have probably kissed any hope of after sales service good bye.  Believe me, it’s not fun dealing with time zones and tracking diamonds lost lost parcels.

Stick to a GIA certificate

Most diamond wholesalers and online diamond dealers will have GIA certed stones.  By sticking with one (and the most popular) certificate you’re comparing apples with apples and it makes it easier to compare prices.  Personally, I don’t think a certificate is always required if you know what you’re looking at and you have a rappore with the diamond supplier, but I’m guessing you don’t necessarily conform to both that criteria if you’re on this site!

Visit a few jewellery stores

You’re probably buying a diamond for an engagement ring, so don’t take all the fun out of it by not visiting a jewellery store.

The extra costs of buying a loose diamond

When you buy a diamond in a jewellery store it’s the finished product.  You’ll need to consider the cost of the make which is metal cost of the gold or platinum but predominantly it’s labour.  On top of that a setter and a polisher will do their bit, but chances are your jeweller will give you a single quote for everything other than the cost of the loose stone.

Talk to the diamond dealer on the phone

The stones I sold were leads generated from the internet - either the CanadaMark web site or through a Google Adwords campaign I ran - but after a few e-mails it was often better for both parties to just speak on the phone.  I think you can judge someone to a degree once you’ve spoken to them.  They can’t think too long about their answers so you can gauge how honest and knowledgeable they are about the diamonds they are selling.

Find a jeweller

Most brand name jewellery stores won’t let you bring your own loose diamond to set in their jewellery.  So it’s a good idea to find a jeweller (a few in the Sydney CBD do contract work for the brand name jewellers) and they might also be able to source the stone from you.  It might be a bit of a premium but it’s one less hassle.

(to be continued)

This is above and beyond what a diamond buyer wants to know, but if you want to get into high end jewellery retail or diamond wholesale then it’s certainly a great accreditation to have - or one to ask for if you’re already in the industry.

I haven’t done it myself but many of my co-workers from my previous work had and those keen to learn benefited a lot.  I was “the computer guy” so I got away with not doing it, but of course I picked up a lot about pricing and grading when coding diamond pricing calculators and floating prices with the index.

There’s only one organisation providing education in this field in Australia and it’s the Gemological Association of Australia.  If you click on your state under “GAA State Divisions” you will see pricing and when the courses run.  If you’re only interested in accreditation in diamonds then Diamond Technology is what you want.

If you’re in North America then you can go direct to the Gemological Institute of America (GIA) and do their Graduate Diamond Diploma.

So I’m thinking you’re probably wondering who and what to trust when it comes to buying a diamond.  If you’re buying a diamond online then you definitely need a certificate so you know what you’re getting, it’s not like buying a used car where the make and model are obvious (and some diamonds cost as much as a car!)  For those who opt to go “offline” to buy them, the brand, marketing and presence of the jewellery store can build the trust in lieu of a diamond certificate, but most will have certified stones too.

So how do you know that the certificate is worth the paper it’s printed on?  There are so many organisations providing diamond certs - GIA, AGS, GSL, IGI, HRD, EGL and the list goes on.  I ordered that list in the frequency in which I saw them where I worked and I think was quite representative of which certification organisations are the largest and most trusted.  Personally I thought GIA seemed to give the buyer the most confidence because it is the most common.  You know when you compare diamonds online that are GIA certified then you make accurate price comparisons between them.

I also like the fact that you can do a GIA report check so you can verify the diamond grading report is genuine which was an issue a couple of times in the last few years as there were some fake GIA certificates in circulation.

So what’s my conclusion about gemstone certificates?  If I bought online it would have to be a legitimate looking site (I will post more on this later) that offered certificates from either GIA, AGS or GSL (which is Gem Studies Laboratory in Sydney) and if I was buying offline at a high end jeweller I would be inclined to not be so picky because you’re buying into the brand and there should be trust there.

So, everyone gets told about “The 4Cs” (colour, clarity, carat weight, cut) and that they all play a factor the price of the diamond, but the cut in my opinion is the biggest factor in the value of the diamond.  So let’s break it down: colour and clarity, aside from treated stones, are two facets of diamond grades that are completely out of the hands of the miners, diamond cutters, wholesalers, diamond certification organisations and retailers.  The rough gets dug out of the ground, and nothing we do is going to change the colour and clarity.

The carat weight is also partially determined by what comes out of the ground, but the type of cut determines how much of that rough carat weight sticks around for the finished product. To give you an idea, a modern round brilliant cut might lose 70% of it’s carat weight and a princess cut around 60%.  There’s no exact amount that it will lose and due to the irregularity of the shape of the rough it will always slightly vary, but that gives the cutter a clear choice: cut for weight or cut for proportions (or what you refer to as the “cut” in the 4Cs).

I’ll give you an example, they might have an F/VS1 stone and they could aim to have a cut and polished weight of 1.00ct with fair proportions or 0.98ct with excellent proportions.  What’s the incentive to go for fair proportions?  Well, at time of publishing, a round brilliant cut just under 1ct vs. one just over 1ct is approximately 45% more expensive per carat.  But, to be fair, the seller will probably (hopefully!) not pass the full price increase onto you if the larger one doesn’t have the same cut grade.

So, it would seem that around the boundaries of pricing brackets that cut and carat weight can be inversely correlated and I’ll finish this post with a question: would you rather have a poorly cut and marginally larger stone that you paid up to 45% more for, or a 0.98ct stone which came from the same rough and is brilliant?  I know which diamond I’d have bought!