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Diamond Prices

Before you head off to buy a diamond, you must understand how a diamond is priced. First of all, you have to be aware that a diamond is a commodity. Commodities (like gold, wood, silver, etc.) have fair prices.

A diamond's fair priced is determined is determined by many factors relating to the 4Cs (and beyond). So, you should familiarise yourself with the 4Cs before you buy any diamonds. Else you will most likely be overcharged.

The Rapaport Diamond Price Report™ (Rap Report)

Rapaport ReportMost diamond business agreements and dealer sales are based on Rapaport prices. Almost all negotiations on diamond prices in the trade are based on the Rapaport report.

Martin Rapaport owns the company that produces the report. The Rapaport Diamond Price Report™ became the benchmark for diamond prices when his price list gained popularity during the 1979-80 commodity boom when 1.00ct D Flawless reached a dealer price of $36,000 (twice today's list price).

Martin Rapaport has since built a substantial diamond information and service business. He has a sizeable diamond business himself, and therefore is not short of information. Whether he sets or reports these prices to his personal benefit is questionable. However, he has a great incentive to report them fairly because his diamond information empire hinges on the credibility of these reports.

As consumers, it does not matter how Rapaport arrives at the prices. The fact remains that every dealer and diamond merchant uses Rap. So, it is the starting point of all discussions on price.

How to use the Rap Report

Assume that I found a potential diamond with the following qualities:

Carat Weight: 0.62ct
Colour: D
Clarity: VVS2

I will then locate the corresponding carat weight category of the Rap Report, like the chart below. (Note that the chart below is fictitious. Rap Reports are copyrighted and I cannot reproduce it. For a real report, ask your jeweller for one.)

 
     
 
ROUNDS Rapaport: (.5 - .69 CT): XX/XX/04    
  IF VVS1 VVS2 VS1 VS2 SI1 SI2 SI3 I1 I2 I3  
D 77 62 56 49 45 39 31 27 21 16 11 D
E 62 56 52 47 44 37 29 25 20 15 10 E
F 56 52 49 44 40 34 27 23 19 14 10 F
G 52 47 44 40 35 30 24 21 17 13 9 G
H 46 41 37 34 30 27 22 20 16 12 9 H
I 38 34 31 28 26 23 21 19 15 12 9 I
J 30 28 27 24 23 21 20 17 14 12 8 J
K 26 25 24 21 20 18 17 16 13 11 8 K
L 23 22 22 20 20 18 16 15 11 10 7 L
M 20 19 19 18 18 16 15 13 10 9 6 M
 
 
 

That the chart above is for diamonds from 0.5ct to 0.69ct. The Rap Report is made up of many charts above. Each chart covers a carat weight range. Prices are quoted on a per carat basis. There other also prices for most shapes of diamonds.

After locating the correct chart, we look for the corresponding value for 'D' and 'VVS2'. In the chart above, it's '56', which means US$5,600 per carat.

We apply the following calculation: US$5600 x 0.62ct = US$3,472.

Hence, we have found out that the 0.62ct, 'D' colour, VVS2 diamond has a Rap Price of US$3,472 as at a particular date.

Adjustments to Rap Price

The Rapaport Diamond Report™ and The Diamond Price Report™ are trade price market analysis and indicator tools of HIGH CASH ASKING PRICES. Price reports do not factor in higher prices for better proportions and finish or lower prices for poor proportions / cut, etc.

As with most trades, professional diamond dealers trade diamonds and negotiate prices based on their individual knowledge of the diamonds. The dealer who has superior knowedge would be able to negotiatiate better deals over poorly informed ones.

As a consumer, it is impossible to get a good deal when buying diamonds because of our limited knowledge. However, we can avoid being blatantly overcharged by understading fully what I have said in the section on the 4Cs, and how diamond prices are adjusted according to cut quality.

Below, is a chart of very rough indication of fair retail prices of diamonds in the USA, according to the AGS cut grades.

 
     
 
Cut Quality
% of Rap Price
AGS Cut Grade of 7-10 and esp. due to pavilion 75% - 80%
AGS Cut Grade of 5,6 84% - 86%
AGS Cut Grades of 3,4 87% - 90%
AGS Cut Grades 1 &2 91% - 96%
Ideal Cut (AGS000 for cut) 98% - 106%
Ideal Cut (AGS000 for cut), Hearts & Arrows 107% - 110%
 
     
 

Please note that these numbers are only very rough guides, and I cannot assume any liabilities for them. Diamond dealers know the limitations in diamond cut gradings and they know how to adjust their pricing in view of the actual flaws of the diamonds. In addition, there are many other factors, like fluorescence that can affect the price of a diamond. Consumers who rely blindly on cut grading on diamond certificates face a high chance of being ripped off.

It is also interesting to note that the price of a diamond varies with the lab that certifies the diamond. An AGS certified diamond is a little more expensive compared with an GIA certified diamond at one time, all other things being similar.

Using the same diamond discussed above, assuming that the 0.62ct, 'D' Colour, VVS2 diamond is graded AGS Ideal for cut, and displays Hearts & Arrows as well. The fair retail price could be around 110% (assuming no other flaws are present). If the craftsmanship of the diamond is superb because it is cut by a well know cutting factory, it may command a slightly higher premium. Assuming that ihe fair price is 115%, the price of the diamond would be (US$3,472 x 115%) = US$3,993.

If anyone tries to sell you a 0.62ct, 'D' Colour, VVS2 diamond for anything more that US$3,993 (in the above situation), be very wary, since one with the very best cut should not cost more than that. Dealers usually buy their diamonds below Rap Prices. If the diamond is cut to extremely high quality (eg. shows no obvious flaws in diamond scans, shows Hearts & Arrows Symmetry and immaculate Lightscope/Idealscope image), the vendor may buy their stock above Rap, particularly if the carat weight is in a popular range. But that is not regular. So, at US$3,993, the retailer is making a decent profit already. Consequently, a diamond with a poorer cut should be given a discount as well.

If you buy your diamond from a shop that is located in malls with expensive rent, expect the markup to be higher since they have to pay the expensive rent, as well as the friendly sales staff that serve you tea, and give you the royal treatment. If you buy from an internet store, you should expect the markup to be lower, since they have lower overheads. You can also expect prices to be higher for vendors who give you more information since the equipment (and time) used to prepare the information are costly. Some of these help you select a better diamond. Some of these make you feel good. It is up to you how you want to spend your money.

Rap prices can serve as a defensive tool for consumers, but it can also work against them Some jewellers will tell you that they are selling you a particular diamond at 20% below its Rap Price per se, but you may be getting a bad deal from it because of bad cut, or some other optical flaw that cannot be objectively measured. You can never win when you buy a diamond. The whole idea is not to lose too much.

Branding

Brands command a huge premium. I will be discussing some major brands in the next few pages. I will try to estimate the premium you are paying for the branding. When you pay the substantial premium, it is worthwhile to find out what you are getting in return.

 
     
     

Next: Understanding Diamond Reports...