Why Do Diamonds Cost So Much?

Why Do Diamonds Cost So Much

Diamonds are literally pieces of shiny rocks, exquisitely beautiful shiny rocks, and yet they cost an arm and a leg. Whether you are shopping for one to pop that big question, to gift someone, or to add to your collection; you must wonder why diamonds cost so much.

1. They are Rooted in History

As far back as can be remembered, diamonds have always been a symbol of wealth. Beyond that, diamonds were used to store and transport wealth across geographies. Families have handed this wealth down generations and the trend continues.

Next to precious metals such as gold, diamonds have over the decades been marketed to preserve their image as valuable commodities. Think about celebrities going for the rarest or most expensive diamond fashioned jewelry and designers incorporating the costly gems in articles of clothing. Diamonds are perceived as one of the must-have commodities.

The construction, automotive and telecommunication industries also keep incorporating diamonds in their products. Diamonds are a big deal! They have become greatly engraved in every faucet of life and you can bet that diamonds will remain etched in history, so highly valued and maintain a high price-point.

2. They are Rare

Yes, natural diamonds are hard to come by and a lot of resources have gone into diamond mining. Diamonds by default symbolize wealth and that is why there are corporations that have spent decades mining diamonds and refining the product.

There have been debates about the “true rarity” of diamonds. Since 1870 when huge diamond deposits were discovered in South Africa, diamonds started flooding the market. During that time the price of diamonds went down, because they soon became somewhat common items. Private investors started monopolizing diamond mines and in turn controlling the supply.

In the dawn of the 20th century, diamond stores were being discovered across the globe. More sites are currently being explored and who knows how many more diamond mines will be discovered in the near future?

The “damage” was already done and the perceived rareness and global appreciation of the value of diamonds, their high price-point stands.

3. The Trade Hierarchy

Picture the life-cycle a diamond goes through before it ends up on an engagement ring.

  • A miner labors weeks on end to mine diamonds. Then the diamonds are sent to warehouses where they are packaged and sold.
  • Middlemen who buy the unrefined diamonds from the warehouses then distribute them to diamond vendors who specialize in diamond cutting.
  • Diamond cutters work to refine the diamond and present it in the right shape and size to maximize on their individual brilliance.
  • The diamond cutters then sell the refined diamonds to wholesalers, who then sell individual stones to jewelry makers and private buyers.
  • Jewelry makers’ fashion high-priced jewelry using the diamonds.

By the time the end user gets their hands on that diamond, they take on all the costs of the trade process.

There are definitely many other reasons why diamonds cost so much, but these are the 3 main reasons why you’ll be breaking the bank for that diamond ring.

Carl A. Jones, GIA GG

Carl A. Jones is a GIA Graduate Gemologist with over 20 years of experience in the diamond industry. He is an independent jewelry appraiser. He specializes in determining the value of diamonds and advising consumers on how to buy quality diamond jewelry.

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