Why Are Diamonds So Expensive?

Any person who has looked at buying a diamond ring may have wondered this exact question: Why are diamonds SO expensive?!! They are beautiful, for sure, but when did they start costing so much? With a brief history of diamonds and the influence of marketing, it is easy to see how supply and demand got a hold of the diamond market. 

Most Expensive Diamonds

While the vast majority of humans will never be able to afford the following diamonds, sometimes it is just fun to dream. CNN gives us insight into some of the world’s most expensive diamonds:

  • A 102.39 – carat diamond may become the world’s most expensive diamond in a Hong Kong auction in October 2020. Based on similar sized diamonds with the same quality, it is expected that it may sell for more than $26 million!! Note: It has been classified as a class D white diamond and flawless, which places it among the rarest in the world. In fact, there are only seven diamonds of this caliber of more than 100 carats that have ever been to auction! 
  • A 163.41- carat rectangular diamond sold for $33.7 million at Christie’s.
  • A stunning 59.60 – carat pink diamond, called the Pink Star, was sold for $71.2 million at an auction at Sotheby’s in Hong Kong in 2017. This is the most expensive jewel to ever be sold at an auction.
  • The Blue Moon diamond  (12.03 – carat) was sold in 2015 for $48.4 million.

History of Diamonds

In taking a look at the history of diamonds given to us by the Gemological Institute of America, we will focus on the modern diamond market. With the discovery of diamonds in South Africa, the diamond market was about to boom. Cecil Rhodes created the De Beers Consolidated Mines Limited 22 years later in 1888. The De Beers bought more and more mines throughout South Africa and eventually controlled around 90 percent of the world’s rough diamond production. Talk about controlling the market! 

Below is a timeline to help explain the rest:

  • Due to the time-consuming process of mining and high costs, many new sources found or created less expensive and more efficient ways to mine diamonds.
  • The production of diamonds went from less than one million carats in the 1870s to three million carats in the 1920s. By the 1970s, production was at 50 million carats, and in the 1990s, it was beyond 100 million carats! 
  • From 1970 to 2000, diamond production expanded to Zaire, Russia, Botswana, Australia, and Canada. 
  • De Beers reduced its role in the diamond supply, allowing it to enter the market through multiple methods.

Keeper of the Prices

The Gem Society explains that De Beers helps set and determine the price of diamonds every season, and dealers have to fight to be one of the few invited to buy diamonds directly from De Beers ten times a year. 

The diamond dealers don’t have room to negotiate because De Beers sets the price. There are strict rules that must be followed even when the buyers try to sell the diamonds they purchase, or they will face consequences. De Beers wants to keep the prices of diamonds high and in demand.

Rapaport Group

In order for diamonds to be given a worth, Martin Rapaport created a measurement called a diamond “rap list” that prices for diamonds based on colorless round, pear, and marquise cut diamonds. Based on the price they can get in the New York market, they set the value and update it weekly on RapNet. These are called Rap prices. However, within the rap list, variations also need to be considered for the color, clarity, cut, and carat of the diamond. Diamond Mansion has an engagement ring guide to help you learn about all the intricacies to look for when buying a diamond.

Buying A Diamond

When buying a diamond, we hear a lot about carat, cut, color, and clarity. However, what about the cost? This, too, is one of the most important factors in choosing a diamond. Diamond Mansion has a variety of beautiful diamond engagement rings to help fit your needs and budget.

The Three-Month Rule

We have all heard the three-month rule about the cost of an engagement ring. However, just in case you haven’t heard of it, here it is: A man should save up three months of his salary to buy his fiancee an engagement ring. WHAT? For many people, that amount is unreasonable and could be detrimental to their finances.

Reality

According to CNBC, one in five people plan on spending between $5,000 and $10,000 on an engagement ring. However, of respondents in a survey of 1,753 American adults, 59% said they only spend between $500 and $2,500. This is far less than the old adage dictates. Given that salaries have risen with inflation, one simply doesn’t need to feel societal pressures to follow suit.  

Tips For Staying In Budget

  • Focus on what you can realistically spend and stick to that number.
  • Don’t compare yourself to others or what you see on social media.
  • Determine what costs you will personally have for the wedding and create your budget for the ring accordingly.
  • Start saving a bit of your paycheck each month for an engagement ring fund.
  • Cut out unnecessary spending like eating out and take public transportation if possible.
  • NEVER go into your retirement fund or use credit cards to help cover costs.
  • Remember, you can always start within your budget and in 10 years, upgrade if you choose.

Proposing to the love of your life should bring joy and excitement, not stress or a financial burden. Diamond Mansion will always have fair prices and work with a buyer to stay within budget, while still purchasing world-class quality jewelry at a revolutionary price. 

Sources

Link 1: https://www.gia.edu/diamond-history-lore

Link 2: https://www.gemsociety.org/article/what-determines-diamond-cost/

Link 3: https://www.cnbc.com/2020/02/13/why-you-dont-need-to-spend

Link 4: https://www.cnn.com/style/article/diamond-auction-hong-kong/index.html