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Why are diamonds so expensive?


Is it true that there are lots of diamonds, but a diamond cartel controls their release to keep prices high?

3319 day(s) ago

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cabbagehead
While that may have been the case, DeBeers has gone from controlling 80% of the world market to only 40%.

Gem stones are weighed in carats*, with one carat weighing 200mg. Benitoite is the second rarest gem stone, but only trades for around $2,500 per carat. A three carat gem-quality diamond will go for at least $3,000 per carat. Why? The average Joe can look at a quality diamond and know it's a diamond, but benitoite's value would have to be explained to him.

The real reason is simply a matter of supply and demand: quality diamonds are relatively rare, while demand for them is high thanks to the jewelry market. When people think jewelry, especially in regards to engagements and weddings, they think diamonds. This is partly from tradition, and partly from DeBeers' sappy yet effective ads, like this one:


There is no solid classification for what qualifies as "gem quality," but it's generally considered to be something that can only be applied to 20% of all diamonds mined. That means of the 130 million carats mined each year, only 26 million will go into jewelry while the rest will be used in industry. That's only about 50 million new gems on the market worldwide ready to be made into rings, earrings, and necklaces.

At this point you're probably asking yourself, "If benitoite is the second rarest gem, what's the rarest?" Diamonds come in several colors depending on impurities, and while higher values are generally given to colorless diamonds, only six red diamonds have ever been found. Other factors like size and imperfections also affect the price. A ring with a 0.15 carat diamond that hasn't certified by the GIA (Gemological Institute of America) or AGS (American Gem Society) can be as little as $125, although the diamond will be dull. A ring with a certified gem over three carats will start at over $60,000.

*Not to be confused with karats, a measure of metal purity often applied to gold jewelry.

Posted 3319 day ago

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