A lot of people are interested in how diamond prices are determined. Why does one diamond cost $1,000 while another sells for more than $5,000? What makes two stones so different that their prices differ wildly? Keep reading and we’ll help you learn how diamond pricing works.
How Diamonds Are Priced
An important point you should remember when it comes to diamond pricing is that diamonds are priced per carat. For example, a $2,000 0.5-carat diamond costs $4,000 per carat ($2,000/0.5 ct), and a $12,000 1.5-carat diamond costs $8,000 per carat ($12,000/1.5 ct).
Conversely, if a 1.25-carat diamond costs $6,500 per carat, then its total price would be $8,125 ($6,500 per carat multiplied by 1.25 carats).
So, to get the total diamond price, use the following formula:
Total Diamond Price = Price per Carat x Carat Weight
As you can also see, prices per carat go up the bigger a diamond gets. This increase is mainly due to the fact that bigger diamonds are rarer compared to smaller ones.
Now, if you check the prices at most diamond retailers, the price you will be given for any particular stone will most likely be a total price, not per carat. But these prices are still based on per-carat prices quoted among diamond dealers.
Price Jumps at Popular Carat Numbers
While diamond prices go up when carats increase, you can see that prices jump sharply at popular carat numbers such as 0.50, 0.75, 1.00, 1.25, 1.50, 1.75, 2.00 carats, and so on. For example, if a 0.45-carat diamond sells for $1,200 and a 0.46-carat stone sells for $1,250, a 0.50-carat diamond will cost $1,650.
While it can be argued what this effect is due to, one of the likely explanations is that such carats are in greater demand and are therefore more expensive. The bottom line is that you can save some money by buying carats slightly below such popular numbers. For instance, instead of buying a 1-carat diamond, you can buy one in the 0.95-0.98 range – it will look just as big but it will be cheaper.
Is a Bigger Diamond Always Better?
Bigger diamonds are sought after and thus more expensive partly because most consumers believe that these stones are always better than smaller ones. But is this always the case? Although a 1-carat stone is bigger than, say, a similar 0.75 stone, the former is not necessarily the better choice.
For one thing, a bigger stone that is poorly cut and has a visible yellow tint or a prominent inclusion will look less brilliant, clean, and bright compared to a well-cut smaller stone that is eye-clean and colorless.
So, when evaluating whether a diamond is worth its price, you should also take into account its cut, clarity and color.
We recommend that you choose the better-looking stone (i.e. colorless, clean, and more brilliant), even if it is smaller, over a worse-looking but bigger diamond. A higher price doesn’t always mean a better diamond.
Diamond Pricing Criteria
There are a lot of factors that go into diamond pricing – color, clarity, cut, polish, fluorescence, etc. Here are the most important diamond price factors:
- Carat – the weight of the diamond
- Color – the degree of colorlessness (absence of a yellowish tint) of the diamond
- Cut – the proportions of the stone
- Clarity – the presence (or absence) of visible flaws in the diamond
- Shape – whether the stone is round, rectangular, oval, etc.
The Carat Weight Factor
If you look at diamonds that are otherwise identical (in terms of color, clarity, and cut) but that differ in weight, you’ll notice that bigger stones are exponentially more expensive.
This means that a 2-carat diamond is not twice as expensive as a similar 1-carat stone but rather 3-4 times as expensive or even more. For example, if a round 1-carat diamond costs $7,000, a 2-carat diamond of the same quality could sell for $24,000-$28,000.
The Color Factor
Color is another quality factor that affects the price of a diamond. Generally, the more colorless a diamond, the more expensive it is, all else being equal. Colorlessness here refers to the absence of yellow or other tints in the stone. The more intense and visible such tints are, the cheaper the stone is.
The Clarity Factor
Clarity refers to the absence of visible flaws (inclusions) in the stone. Diamonds that have imperfections that are more visible and numerous are cheaper. Conversely, stones that are cleaner – i.e. have fewer visible inclusions or none at all – command higher prices.
The Cut Factor
Diamond cut refers to the proportions of the diamond. There are combinations of proportions that have been found to maximize brilliance and sparkle. The closer a stone’s cut is to these proportions, the more expensive the diamond is, and vice versa – diamonds whose cut is not as proportional (and thus results in lower brilliance) are cheaper.
The Shape Factor
Cut is different from shape, although the difference is subtle and the two terms are sometimes used interchangeably, and shape names often contain the word “cut” (e.g. radiant cut, marquise cut, etc.).
While cut refers to the proportions of the stone and to the number and position of its facets, shape refers to whether a stone is round, oval, rectangular, triangular, etc.
More popular shapes such as the round cut and the princess cut are more expensive compared to other shapes such as the pear cut or the trilliant cut.
Important: Certification and Grading Labs
In order to properly assess a diamond’s color, clarity, and cut, you’ll need its certificate, which is a document containing grades for these quality criteria. These certificates, or diamond reports, are issued by grading labs such as the GIA or AGS.
When comparing diamond prices, make sure their grading certificates are issued by the same lab in order to make sure that you are comparing stones graded by the same standard.
Why Do Diamonds with the Same Color, Clarity, Cut, and Carat Still Differ in Price?
When comparing diamonds, you may notice that there are some stones that still differ significantly in price although they are identical with respect to their 4 Cs (Color, Clarity, Carat, and Cut).
This is because there are additional factors that affect diamond prices and on which these stones differ. But what else could impact diamond prices besides the 4 Cs?
Additional Diamond Pricing Factors
The following factors can make two diamonds differ in price despite being identical with respect to color, clarity, cut, and carat:
Some diamonds fluoresce (usually in blue) when exposed to UV light. The presence of fluorescence usually lowers the price of a diamond. This is because fluorescence can cause a diamond to appear hazy.
However, there are some exceptions to this rule: In diamonds whose color is graded H or lower, the presence of Medium fluorescence (blue) could make the stone look whiter, and such stones may not be discounted because of their fluorescence.
Polish refers to how smoothly polished the surface of a diamond is. The polish grade of a diamond can also make it more expensive compared to stones with a lower polish grade.
Symmetry describes how well shaped the facets of a diamond are and how symmetrical their positions are with respect to each other. Diamonds with higher symmetry grades are usually more expensive, all else being equal.
Diamonds with girdles that are too thick or too thin are often discounted. Overly thick girdles make the proportions of a stone less than ideal. Girdles that are very thin are prone to chipping. Diamonds with girdles that are in the middle of the road – i.e. not too thick or thin – sell at a premium.
The culet is the facet at the bottom of diamond. Many diamonds nowadays are not cut with culets. The most optimal situation for a stone is either to have no culet or to have a small one. Big culets are visible through the top of the stone and can impair its pattern of light return – such stones may sell at a discount.
When it comes to inclusions, the general rule of thumb is that the smaller and less visible they are, the better. The interesting thing is that diamonds with the same clarity grade can vary in how visible their inclusions are, and so their prices can vary for this reason too.
Diamonds that don’t have inclusions readily visible with the naked eye are referred to as “eye clean” and are more sought after. On the other hand, diamonds with bigger and more noticeable inclusions are less desirable. Such stones may be cheaper than an eye-clean diamond for this reason, even if both diamonds are of the same clarity grade.
Some vendors create selections of their best-cut diamonds – stones that are not only cut with ideal proportions but that are actually the cream of the crop among these “ideal” diamonds. Such diamonds are usually labeled with a special brand and sold at a premium.
Brick-and-Mortar vs. Online Stores
Whether a vendor sells online only or has a brick-and-mortar location can affect the price of the diamonds sold by the business. Brick-and-mortar jewelers often charge more for diamonds in order to cover their additional costs for renting space and operating the store.
Online retailers, on the other hand, don’t incur many of the costs B&M retailers have and can thus offer lower prices.
Last but not least is the brand under which a diamond is sold. Many high-end jewelry brands charge a premium because their name is associated with luxury. Case in point is Tiffany & Co. You can definitely buy a diamond with the same characteristics more cheaply elsewhere than at one of these stores, but the high price you’re paying when shopping there is for the brand name.
Diamond Price Lists
So it’s clear that diamonds are priced per carat, but where can you get these prices? The most popular source in the industry is the Rapaport Diamond Price Report, followed closely by the IDEX Diamond Price Report.
What is the Rapaport Diamond Report (Rapaport Price List)?
The Rapaport Price List (also called the Rap List) is a report on diamond prices by color, carat, and clarity. It is published weekly by the Rapaport Group, whose chairman is Martin Rapaport – a businessman who has founded many diamond-related businesses.
The Rap List is used as a reference when pricing individual loose diamonds in the industry.
The Rapaport Price List groups diamonds into carat ranges (e.g. 0.90-0.99, 1.00-1.49, 1.50-1.99, etc.). For each carat group, there is a grid that lists all combinations of color (vertically) and clarity (horizontally) and the respective ‘Rap Price’ for each.
Prices are given in hundreds of dollars and are per carat.
When diamond prices are discussed with reference to the Rap List, they are quoted in terms of discount or premium to the rap price. So if a diamond trades at a discount to the Rap Price, that diamond’s price per carat is lower than the Rap Price, and if the diamond trades at a premium to the Rap Price, the stone’s price per carat is higher.
So what determines whether a diamond will trade at a discount or premium? Usually, it is a combination of factors (beyond color, clarity, and carat) such as: the quality of the stone’s cut, how visible the inclusions are (whether the diamond is eye clean), whether the stone has fluorescence, etc.
Diamonds usually trade at a discount to the Rap Price, and this discount is quoted in terms of percentage below or percentage back. For example, if a 1-carat F-color VS1-clairity diamond is selling at a 10% discount to its Rap Price (per carat), then it is said that it is sold at “10 back” or “10 below”.
One thing to note here is that Rap Prices place a heavy emphasis on color and clarity over cut. However, in reality, as long as a diamond’s color and clarity are above a certain minimum, and there are no visible yellow tints and flaws, additional improvements on these two dimensions won’t be visible to the naked eye. In such a case, any additional money paid for better clarity and color would be squandered, and you would do better to pay for an Ideal/Excellent cut instead.
So how do you calculate a diamond’s price based on the Rapaport Price List?
First, you need to find the diamond’s carat group. For example, if the diamond in question is 1.75 ct, look at the grid labeled “1.50 – 1.99 CT”. Next, find the color grade of the diamond in the leftmost vertical column, and then find the clarity grade in the topmost column. For example, if the diamond is J color and VS2 clarity, find where the J row intersects with the VS2 column – this is the stone’s Rap Price.
Now if a diamond dealer sells such a stone at “15 back” or “15 below” to the Rap Price, this means that you need to subtract 15% from the price. So the price of the dealer becomes $10,710 ($12,600 – $12,600 x 15% = $12,600 – $1,890 = $10,710).
The IDEX Diamond Price Report
IDEX, or the International Diamond Exchange, also publishes a diamond price list, as well as a diamond price index. This diamond price report is called the Diamond Retail Benchmark.
The Diamond Retail Benchmark (DRB) is used in pretty much the same way as the Rapaport Price List – buyers and sellers look up the price per carat for a given diamond with certain color, clarity, and carat, and apply a discount or a premium (usually a discount) to arrive at the quoted price.
How Can I Use the Rapaport Price List or the IDEX Price Report?
While the Rapaport Price Report and the IDEX Price Report are used as references in the industry when prices are quoted, they are not accurate indicators of what a certain diamond should sell for at a retail store. Why is that?
First, these price lists don’t take into account the cut of the stone, which is one of the important factors that affect a diamond’s price. A diamond with an Excellent cut will cost more than one with a Good cut even if both stones are identical in terms of carat, color, and clarity.
Second, the prices in these lists are given for carat ranges, not exact carats. Needless to say, there can be a significant difference between the price of a 1.10-carat diamond and that of a 1.45-carat one.
Third, the prices in these reports are based on high asking prices, which are not necessarily indicative of the average prices most diamonds sell for.
Fourth, there are other factors affecting the price of a diamond besides color, clarity, carat, and cut. For example, fluorescence, polish, symmetry, eye-cleanliness, etc. are all factors that can make two otherwise identical diamonds sell for different prices. These price lists do not account for these additional criteria.
Also, if someone tells you that a diamond is a great deal just because it sells at a discount to its Rapaport Price, remember that it is actually common for diamonds to sell at a discount to these prices – after all, they are based on the maximum asking prices, not the averages.
So the main takeaway is this: Do not use the Rapaport Price List or the IDEX Price Report as a benchmark for how much a diamond should cost!
Unless you follow prices closely and are an expert in diamond pricing, you won’t know whether a certain discount or premium to the Rap Price is reasonable or not. There are much faster, easier, and reliable ways to do price research on retail diamond prices as a consumer.
How to Get Reliable Diamond Price Information
So where can you find reliable diamond prices?
The best places to do your research are online diamond retailers.
But why is that?
Besides the obvious advantages of being able to compare diamond prices fast, from the convenience of your home, prices at online retailers are some of the lowest you will be able to find as a retail consumer.
Online retailers don’t have a lot of the costs associated with brick-and-mortar shops and also work with minimal mark-ups. For example, for a retailer such as James Allen or Blue Nile, less than 5% of the end price of a diamond is profit.
Our suggestion is to use prices of online diamond retailers as benchmarks. For example, if you’ve found that a diamond with certain quality characteristics sells for $5,500 online, this means that you shouldn’t pay significantly more, e.g. $8,000, for the same kind of diamond sold by another vendor.
Keep in mind that this also works the other way around – if a diamond is too cheap compared to what the same stone sells for online, then you should be suspicious until you understand what accounts for such a price difference.
But remember: Only compare prices for COMPARABLE diamonds!
This means that they should be identical with respect to the following characteristics:
- Color grade
- Clarity grade
- Cut grade
- Carat weight
- Grading lab (don’t compare stones with grading reports from different labs)
These are the basic features on which diamonds should be identical in order to be compared. However, as we already mentioned, there are additional factors that can make diamonds sell at different prices even though they have the same color, clarity, cut, and carat.
So as a second step, make sure the diamonds you compare are also identical with respect to the following additional characteristics:
- Polish grade
- Symmetry grade
- Fluorescence (Is it Faint, Medium, Strong, or None?)
- Girdle thickness grade
- Culet grade (Is there a culet, and if yes, how big is it?)
After you make sure that you’ve taken into account all these characteristics, there might still be a price difference that is unaccounted for. This might be due to some of the following reasons:
- Inclusions and eye-cleanliness: If two diamonds have the same clarity grade, one may have inclusions that are not visible to the naked eye (i.e. the diamond is eye clean) while the other’s flaws may be more visible. In such a case, the eye-clean stone may sell at a premium. Similarly, a diamond that has bigger and more prominent inclusions may sell for less, all else being equal.
- Branded cut: As already mentioned, some vendors select the best-cut diamonds of their Excellent/Ideal cut stones and brand them as diamonds cut with the utmost precision. These stones sell at a premium compared to other Excellent/Ideal cut diamonds because of the superior brilliance a super-precise cut is believed to have.
After you’ve accounted for all of the above factors, any remaining significant price difference may be due to the mark-up of the jeweler or additional benefits offered by the vendor such as guarantees, warranties, service plans, upgrade plans, insurance, etc.
One tool you can use to research diamond prices is the diamond search tool available at James Allen. The search engine allows you to filter diamonds by most criteria described above. An additional bonus is that the diamonds come with individual pictures and videos, which allow you to view the stones from all sides under magnification.
How Diamond Prices Change
As is the case with the price of any product, diamond prices change over time. These fluctuations are driven by supply and demand, which are in turn driven by a multitude of factors such as production, economic growth, interest rates, seasonality, etc.
It is very hard to predict whether the price for a certain type of diamond will go up or down over a given period of time. So if you’re waiting for prices to fall in the next couple of months, you might find that they don’t budge more than a couple of percentage points in either direction.
At IDEX Online you can see a diamond price index which shows how diamond prices have changed over time. Keep in mind that this index is aggregate – i.e. it doesn’t indicate prices for a particular combination of color, clarity, carat, and cut.
Where to Buy Diamonds and Diamond Jewelry?
For diamond jewelry, we highly recommend James Allen because it shows real photos and videos for each diamond so you can take a 360-degree look at any stone before buying it.
For colored diamonds, we recommend Leibish & Co., which specializes in fancy color diamonds (use code JewelryNotes200 at checkout to get a 5% discount).