Why Are Diamonds So Expensive?

Why Are Diamonds So Expensive?

Diamonds are the most dazzling and beautiful stones that are very expensive. One small diamond can easily get a price of up to thousands of dollars, and some of the rare ones can even be millionaires!

However, the question remains: why are they so expensive?

It is not only their rarity that is the case. The larger part of the money is allotted to the portion of the expense coming from the manner they are manufactured, discovered, cut and sold, as well as a few clever business moves and some advertising.

In this article, we are going to give one very simple reason for diamonds being so expensive.

To begin with, the article will list the reasons, and after that, each reason will be explained in detail. Diamonds would not be perfection merely because of their light refraction - it is the combination of nature, human labor, and the shrewd promotion that makes them so costly.

Main Reasons Why Diamonds Are Expensive

  • Few Good Diamonds: Precious stones that come from the ground are not suitable for jewelries. From the diamonds that we know, only a small number are the most perfect ones, judged by their size, color, clean lines, and cut.
  • Costly Mining: The process of taking diamonds out of the earth is not only difficult but also expensive. It requires large machines, a lot of workers, and sometimes it takes place in the most distant areas.
  • Cutting and Checking Costs: The first step for non-brilliant diamonds is cutting and polishing, and then these should be checked in labs to certify their quality which is part of the price.
  • Controlled Supply: Major corporations such as De Beers manage diamonds in a way that they become scarce as they keep them back so that there are not many for sale thus the prices can be kept high.
  • Advertising and Meaning: Diamonds have been sold through advertisements that make the public feel that diamonds are necessary for the sake of love and marriage, thus everyone wants them, and the price gets higher.
  • Market and Branding: Expensive brands make their products more costly because the people assume the diamonds they sell are unique which is why they accept the myth that diamonds are a good investment even if they are not.

How Diamonds Are Made in Nature

Diamonds are carbon from the Earth's mantle, which have been under extremely high temperatures and high pressure for billions of years. They are brought to the surface by certain volcanoes. This all contributes to their uniqueness and to their being valuable. However, there are still many diamonds, just only 20% of them are suitable for the manufacture of jewelry. The rest of them are used for different purposes, such as cutting too, or disposed of because they are not attractive enough.

Experts check four aspects in a Lab-grown diamond ring the manner of extraction, the clarity of the stone, the color, and the size (carat). A flawless, transparent, large diamond is exceedingly rare; thus, its high cost will be. Like, for instance, the gigantic diamond Culinary, which was 3,106 carats and was valued at approximately 400 million dollars due to the fact that it was very unique.

Extracting diamonds is an equally costly affair. The locations of the mines are mostly in far places such as Africa or Russia, and the use of big machinery and lots of people to get underground makes it a complicated process. It can take up to billions to build a mine! In addition, there are also regulations in place to protect the environment and ensure that the diamonds are not from war areas (conflict diamonds). These regulations, such as the Kimberley Process, increase the cost of mining as well.

In case an individual really looked into the ridiculous prices that are associated with diamonds, it would be very clear that a small diamond can be the most expensive thing in the house, provided that it is still uncut and not transformed into a ring.

Turning Rough Stones into Shiny Gems

When diamonds are extracted from the earth, they are just ordinary-looking stones. However, to make them brilliant, a very careful cutting and polishing has to be done by the specialists. This really requires a lot of the expert’s skill, and frequently, to make it perfect, about half of the diamond is wasted while cutting. Those people who do such jobs are located in places like Antwerp or India, and they are very well paid because it is such a hard job. The diamonds are checked by the most advanced laboratories, like the Gemological Institute of America (GIA), after they have been cut. A grade is given to a diamond by the laboratory to indicate its quality and assist the purchasers in trusting it. However, this kind of control has a cost that may be more than a hundred dollars for each diamond.

The entire procedure from the mining location to a store is what contributes to the value besides the diamond itself. The diamonds are handled by several people at different stages, such as the miners (extraction), sellers (distributors), cutters (refiners), and jewelers (retailers). As every individual who comes into contact with the diamonds at different points along the value chain adds value to the price to make a profit, by the time a diamond gets to a store, it is possible that it can cost two or three times the value it had in the mine. All these processes are what make the diamonds costly.

Controlling the Diamond Market

One of the major reasons for the high price of diamonds is the fact that a few companies have total control over the quantity that is sold. In the 1800s, an excessive amount of diamonds was discovered in South Africa, and the prices started to decline. Cecil Rhodes, the man who came up with the idea, then created De Beers, a company that took over the majority of the mines, buying all the minerals to have absolute control over the supply. They concealed the diamonds and released only a very few at a time, to maintain the impression that they were extraordinary. Thus, the prices were kept at a high level, although diamonds were abundant.

At present, De Beers has a smaller market share (around 30% of the market), but the idea is still there. The firms are still restricting the supply of diamonds to maintain the prices at an elevated level. Their annual production is more than 140 million carats, but they are not giving the whole quantity to the market simultaneously. That is why diamonds are considered to be very rare by many people, although it is possible that they might not be so rare.

You can also read this :- How to Identify a Raw Diamond: A Complete Guide

Advertising Makes Diamonds Special

Diamonds were originally not associated with love, nor with weddings. It was in 1947 when De Beers launched the famous advertisement, "A Diamond is Forever." The campaign conveyed that diamonds symbolize love, and every love story needs a diamond ring. They went as far as suggesting you should devote two months of your salary to one! This concept got global, and presently, the majority of people assume that a diamond is necessary for a proposal.

Other than that, as in the case of Tiffany, the name is used for the sake of selling more at higher prices, as the diamond appears to be more special only because of the name and not because of any quality. Ads featuring movie stars and luxury photographs keep the desire for diamonds alive, which in turn keeps the prices from dropping.

Today’s Market & New Options

Currently, the price of diamonds depends on the demand and the supply of the stones. A new type of diamond has also been introduced: lab-grown ones. These are fabricated in a laboratory in just a few weeks, not billions of years, and are significantly cheaper - sometimes 80% less. However, a lot of people still prefer Natural Black Diamonds because they think those are more "real."

Some people would place their faith in diamonds as a good investment; nonetheless, that statement is not accurate. In most cases, if you decide to sell your diamond, the amount of money you will get will be considerably lower than the amount you paid for it due to the existing stock of diamonds. Also, the buyers nowadays are interested in the most ethical diamonds, those that have not been derived from wars and have not damaged the environment. Those types could even be more expensive because of the extra checks.

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How to Identify a Raw Diamond: A Complete Guide

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