There are a few recurring debates related to the pricing of diamonds and I want to address them in this article. First of all, the main influence on the pricing mechanism of diamonds is obviously the Rapaport Diamond Report.
However, there are a number of other factors that affect diamond prices and the speculation of current prices – and these are going to be with us in the future too.
Let us take a look at the major topics that are relevant to how the diamond market is going to evolve and the trends we would expect to see in near future.
The Rapaport Diamond Report was first published in 1976 by Martin Rapaport. Since then, it had been the go-to price guide for traders and businesses. Now, the Rap report is basically a price chart which categorizes diamonds into various shapes and qualities. Under each category, an “ideal price” for stones ranging from two points to five carats is listed.
In the last three decades, the Rapaport Report has defined the pricing strategy of jewelry companies and large trading firms. And this situation is unlikely to change in the near future. I can say with a fair amount of certainty that future diamond prices will be heavily pegged to the Rap report.
If you are interested in finding out more, you can get more details at Diamonds.net.
Blood diamonds are diamonds that were mined under inhumane conditions in conflict zones like Sierra Leone or Liberia back in the 90’s. The war efforts of rebel leaders and insurgencies were largely financed from the profits of these stones. With negative backlash linked with violence and brutality, it is a bad idea to buy and be associated with such diamonds.
In order to restrict and curb the flow of illicit diamonds, the Kimberly Process was established to combat the trading and smuggling of conflict diamonds. Many countries and governments had also lay down strict regulations and boycotted the commercialization of such diamonds.
Even though wars do not last forever (Liberia has been allowed back in the Kimberley process since 2007), it is unlikely that conflict diamonds would completely disappear anytime soon.
As diamond supplies from certain countries get banned and banned countries are allowed back into the international diamond market. That will cause a change in worldwide supply and a dilution of the diamond market. Down the pipeline, this will affect diamond prices and the direction of such changes can be rather unpredictable.
Most big-name online diamond vendors had been around for more than a decade and have thousands of customers who are pleased with their purchases. Like it or not, e-commerce is here to stay and slowly becoming a bigger part of our lives.
The upcoming dominance of online distribution will probably not change the pricing mechanism of diamonds. However, it will affect the prices that consumers pay for their goods. Since online services have significantly lower operating costs due to lower rentals and overheads, they are able to offer their products with lower prices compared to “offline” rivals.
Aside from giving consumers lower prices, the other members of the trading chain can also enjoy the benefits of online services. The reasons are similar: communications and conducting business is far cheaper when done digitally and the amount of paperwork that can be reduced is extraordinary.
By moving entire marketing chains to “the cloud”, a lot of costs incurred in the traditional way of doing businesses can now be eliminated.
Synthetic diamonds are nothing new and there are already commercially viable processes at present times. Even though lab grown diamonds do not have wide spread adoption at the moment, my personal take is that this will change in future.
Well, as technology improves and better quality rough diamonds can be made, prices for them will become more attractive. Besides better economics, there is a changing consumer behavior that is slowly happening as more people become aware of alternatives to mined diamonds.
The demand for diamonds had always been engineered through clever marketing and I won’t be surprised if lab grown diamonds successfully take off when retailers decide to spend more money on advertising.
And if this happens, we may see the prices of natural diamonds come under pressure.
Many people have the misconception that diamonds are rare pieces of jewelry.
This is not entirely true. Large organizations and the so-called diamond cartels stockpile huge amounts of diamonds in order to prevent the market from getting over-saturated. This is done in order to maintain the “exclusive value and status” of diamonds.
In a way, the actions taken by large cartels and major rough diamond distributors can have an impact on diamond prices. If supply can be manipulated, the prices of diamonds can be controlled.
Source: ResourceInvestor.com – Diamond Price History
Even though it is impossible to predict exactly what the future holds, one thing is for certain: diamonds will continue to captivate us as symbols of love and commitment. We do not want diamonds to become commodities anyone can offer and we do not want our diamonds to lose their value.
CNN – How Diamonds Fuel Conflicts
BBC News – Does the Kimberly Process Work
Sierra Leone Fortune Changes