Diamond Prices

Factors Affecting Diamond Prices

Diamond prices are shaped by both macro market dynamics and the unique characteristics of each individual stone.

Overall Market Factors

Oversupply

When diamond availability exceeds demand, prices tend to decrease as sellers try to stimulate sales and reduce excess inventory.

Currently, the increased production of lab-grown diamonds has contributed to an oversupply of both natural and lab-grown stones.

Regulations

Regulations and trade policies significantly influence diamond prices by affecting supply chains and market accessibility.

For example, the current ban in G7 countries on importing diamonds from Russia has severely impacted the diamond supply, particularly for smaller stones, leading to increased prices due to scarcity.

Demand Shifts

Shifts in consumer preferences can cause significant fluctuations in diamond demand and pricing. Current trends favoring lab-grown diamonds and alternative gemstones are reducing demand for natural diamonds, resulting in price reductions. Economic factors like recessions or booms also affect disposable income and the willingness to spend on luxury items like diamonds.

Currency Fluctuations

The diamond trade is global; a natural diamond may be mined in Botswana, sold in London, polished in India, and then sold again in Antwerp before reaching New Zealand.

Individual Diamond Factors

Alongside macro factors, each diamond's unique characteristics contribute to its price.

Shape

A diamond's shape significantly influences its price due to variations in demand, manufacturing costs, and the amount of rough diamond required. The round brilliant cut is typically more expensive because it is highly sought after and involves more waste during cutting, requiring a larger rough diamond.
'Fancy' shapes like princess, cushion, oval, and emerald cuts often result in less waste and may have lower popularity, making them more cost-effective options.

Carat Weight

Carat weight significantly impacts a diamond's price - larger diamonds are rarer and command higher prices per carat.

But the relationship between carat weight and price is exponential, not linear - a two carat diamond may cost significantly much more than twice the price of a one carat diamond of the same quality.

Prices also tend to increase at key weight thresholds, known as "magic sizes" (e.g., 0.5 carats, 1 carat, 1.5 carats), due to higher demand at these popular sizes.

Quality Factors

The price of a diamond is also determined by its quality, assessed through the Four Cs: Cut, Colour, Clarity, and Carat weight.

Cut

The cut is perhaps the most critical factor affecting a diamond's beauty and price.

While cut can sometimes be confused with a diamond's shape, it actually refers to the proportions of the diamond, which determines how well the diamond interacts with light and therefore how much it sparkles.

Diamonds with an excellent or ideal cut grade sparkle most brilliantly but are more challenging to achieve, resulting in a premium price. Diamonds with lower cut grades may cost less but often lack the same level of brilliance and can appear dull.

Colour

The whiter a diamond is, the rarer and more valuable it is.

The colour scale ranges from D (colourless) to Z (light colour). Diamonds graded D-F are considered colourless and are exceptionally rare and expensive. G-H graded diamonds are near-colourless and offer excellent value, as any colour is typically undetectable to the untrained eye. Diamonds beyond J may display a faint yellow or brown tint, becoming more noticeable toward Z, generally reducing the price.

Clarity

Clarity is a measure of the presence of internal inclusions and external blemishes in a diamond.

The clarity scale includes grades such as Flawless (FL), Internally Flawless (IF), Very, Very Slightly Included (VVS1 and VVS2), Very Slightly Included (VS1 and VS2), Slightly Included (SI1 and SI2), and Included (I1, I2, and I3). Flawless and Internally Flawless diamonds are extremely rare and command the highest prices. Diamonds in the VVS and VS categories have minor inclusions that are difficult to detect even under magnification, offering a balance between quality and value.

Other Attributes

Additional characteristics, such as fluorescence, polish, and symmetry will also affect a diamond's appearance and price, although they have a smaller effect than those listed above.