Everyone knows that diamonds are expensive, but how exactly are their prices determined? Let’s see what factors drive the value of these stones and how you can estimate how much a diamond is worth.
What Determines How Much a Diamond Is Worth?
The worth of a diamond is highly dependent on its quality, which is characterized by four main criteria: color, clarity, cut, and carat.
When it comes to diamond color, stones that are colorless are worth more than those that have some tints (usually yellowish), and the stronger these hues are, the lower the value of the diamond.
Clarity refers to the number and visibility of natural flaws in a stone (black carbon spots, lines, etc.), and the fewer such imperfections can be spotted in a diamond, the more valuable it is.
The cut grade of a diamond indicates how close its proportions are to an established “ideal” benchmark.
Better-cut stones have greater brilliance and are therefore more valuable.
As for carat, this is a measure of how much a diamond weighs – 1 carat equal 200 milligrams.
Higher-carat stones are rarer, and that’s why bigger stones are disproportionately more expensive than smaller ones.
Calculating the Worth of a Diamond
When it comes to establishing the worth of a diamond, there are two values you can calculate: the price you can buy the stone at (retail market value) and the price you can sell it for (resale value).
Retail Market Value of Diamonds
One of the ways to estimate the market value of a diamond is to look at the prices stones with similar or the same characteristics sell for.
To make a proper comparison, you will need to know the exact grades for the color, clarity, and cut of your diamond, as well as its carat weight.
The most reliable source of information about the quality characteristics of a diamond is its grading certificate.
If you don’t have such a document, you can always send your stone to a grading lab, such as the GIA (Gemological Institute of America), to have the diamond’s quality certified for a fee.
A quicker and cheaper way to find out the quality grades of your stone is to go to the nearest jewelry store and ask the jeweler there to look at the diamond and estimate its color, clarity, and cut grades.
The results will be less precise compared to the grades a grading lab would assign, so only choose this option if you just need an approximate idea of where your diamond stands in terms of quality.
Once you know the exact (or approximate) grades of your diamond, you can look up prices for loose diamonds of the same clarity, color, cut, and carat. This information will give you a reasonably accurate estimate of the retail value of your stone.
You can also have your diamond appraised by a certified appraiser, who will not only establish the stone’s color, clarity, and cut grades, but also assign a market value to the diamond.
(In such a case, you won’t need to have the stone certified, as the appraiser will have to determine its quality grades anyway.)
The appraisal option also costs money and is usually worth it if you need documented proof of the stone’s value.
Resale Prices of Diamonds
Whatever the estimated retail value for your diamond, keep in mind that this is not the amount of money you would get if you sold it to a diamond dealer or jewelry store.
The resale value of a diamond is much lower than its retail price – usually, around 20% of it.
Some jewelers, however, can agree to a trade-in deal, which could provide you with better value than a cash sale.
Basically, if you agree to exchange your diamond for another piece of jewelry (and pay for any price difference in cash), the jeweler will usually give you a better price for your stone, albeit a non-cash one.
In sum, the worth of your diamond will be highly dependent on whom you sell it to and what you exchange it for – cash or for another stone/piece of jewelry.