Budget and pricing: answers from a diamond dealer (page 2 of 4)

Don't work with a salesperson! Work with an actual expert. A good jeweler will know that selling isn't CONVINCING you of anything. Selling is HELPING you.

Here's how I look at it when someone comes to me for a stone. They know they have to buy a diamond from somebody. So my goal isn't to convince them to buy a stone. My goal is to educate them so they can understand the decision in front of them. If I have something that works for them, and they feel comfortable, great. If not, that's OK. I'd rather not work with someone who's not happy or relaxed about it. That's no fun for anyone.

And don't feel guilty for wasting someone's time. That's literally their job! Everyone in the industry understands that not every single person we talk to will become a client. That's the way the world works. Personally, I'd much rather have the opportunity to meet someone and make a new friend than not. Don't assume every salesperson is your enemy!

Maybe I can point you in the right direction. Where are you located?

How do you know that? And how do you decide what's "easy" for someone else?

Remember, they didn't wake up this morning and say to themselves, "Gosh, I sure hope alonzo211 shows up today to sell me his ring!" They don't particularly want it. So, if they're going to buy it, it needs to be at a compelling price.

Now, $200 does sound really really low... But I haven't seen the ring. Maybe the diamond is garbage and they're just buying it for scrap value. I really can't say.

Personally, if someone came to offer me a secondhand ring that I only wanted to buy at $200, I'd just say, "no thanks, it's not for me," and not make an offer at all. Is that what happened here? Did you get the low offer after they declined to buy? Because if so, maybe this was their polite way of saying, "I don't want to buy this. Please go away."

OK, let me start with a disclaimer. I may come across as a bit harsh or preachy here, and so I apologize in advance. I'm going to take your question at face value, and try to answer it. If I come across anything other than matter of fact, it's only because in many instances this is a loaded question, and feels to someone in my line of work more like an accusation than an actual question. But I'll try to divest myself of that and answer it as if it was asked innocently, and take it at face value.

First of all, who am I and why am I qualified to respond? My name is Dan Moran, and I'm CEO of Concierge Diamonds in Los Angeles, CA. We import and sell diamonds wholesale, and manufacture custom jewelry on behalf of jewelry stores and for private clients (a lot of redditors lately!) around the world. I started the company 8.5 years ago, and have grown to a dozen employees. I have been in the diamond business for nearly 20 years, and my family has been in it for almost 100 years. In fact, my great uncle was among the founders of the Israel Diamond Exchange, one of the largest diamond trading centers in the world. I grew up in this industry, and have seen it from the inside.

That said, I have no real interaction with the large diamond consortiums. They deal almost exclusively in rough diamonds, and I work with polished stones. The cut diamond market is dominated not by large players, but by relatively small family businesses. In the LA diamond district (a large one, but not among the top 10 globally), for example, there are over 1,000 dealers working, and while the largest are certainly very wealthy and successful, they are not on the scale of a publicly traded company, etc. The largest player in LA still has fewer than 100 employees. So, my perspective is definitely that of "boots on the ground," not from some abstract boardroom somewhere. I am an active player in the space, and we made about 900 custom rings last year, so I buy and sell diamonds every day.

Now, your question. Why are diamonds expensive?

For the purposes of my response, let's assume that "diamond" means a natural diamond. LGs have their own cost and price structure, and I'm not getting into that here. There are three primary drivers of the prices of diamonds in general (I'm not talking about the 4 Cs here - those drive the value of a particular stone as compared to others. I'm talking about diamonds in general). Those factors are rarity, acquisition cost, and perceived value.

Rarity

There is a public misconception that "diamonds aren't as rare as everyone thinks." First of all, I find that kind of funny on the face of it, because if EVERYONE thinks they're not so rare, then who is the EVERYONE that thinks they are? But I digress. The reality is that while there continue to be diamonds mined each year, global supply is decreasing. In fact, last month, the Argyle mine in Australia (historically one of the most productive mines in the world) closed permanently - miners declared that they had found all there was to find. The same is expected for many of the world's largest mines in the next 1-3 years. We've simply gotten them all! Global production peaked in 2006, and the total amount of diamonds found has decreased every year since. It's possible we'll find new sites, but really smart, really motivated people have been trying to do that for a while, and we haven't found much. The next step for miners will be to look into undersea mining, but we can only imagine the incredibly high cost of doing that.
It's also important to note that, in the past, while diamonds were abundant in the mines, the VAST majority of those stones were not of gem quality, and even those that were were mostly very small (0.01-0.05 carats when polished). Those make up the bulk of mining production. So, typical "center stone" size and quality diamonds (1ct and up) have ALWAYS been quite rare.

At the same time, global demand for diamonds has dramatically increased in the last 20 years. The industrialization of India, China, and other countries around the developing world has created a wealthy middle class. They want diamonds, and are willing to pay top dollar for them. For a while now, the USA has not been the #1 consumer of diamonds. We used to be in the 80s and 90s, but those days are over, and I don't think they're coming back. So, if the bargain hunting consumer on the internet searches for the cheapest possible stone, he can rest assured it's cheap for a reason. If it was a nice stone, it would have already been sold for 20% more in Hong Kong, Mumbai, or Shanghai. That's just how it goes.

To summarize, global supply decreases every year, and global demand increases. Econ 101 tells us that prices will rise, and this is what supports the value of diamonds.

Acquisition Cost

I've touched on this already, but as diamond mines dry up, it's more and more expensive to get them. We've long since found virtually all the primary (diamonds just lying around in a field somewhere) and secondary (diamonds in riverbeds) sources. Mines (digging deep underground) are tertiary sources, and we're getting to the point of maxing them out too. Next will be quaternary sources (undersea or deep space) diamond mining, and of course those will be orders of magnitude more expensive, so I don't expect any meaningful progress there in the foreseeable future. So, on a gross 100,000 foot level, what we've found up to now (and for a few more years) is all there's going to be. It's just going to be prohibitively expensive to get more, if we can even find them. Diamonds are a good parallel to real estate here. As Mark Twain once said, "buy land - they stopped making it." The same will soon be true of diamonds.

Perceived Value

On some level, diamonds are valuable because THEY JUST ARE. I know that's unsatisfying, but it's a fact. Human beings have invested certain objects and materials (gold, silver, land, bitcoin, you name it) with value, and we treat those assets as inherently valuable. Diamonds have acted as a reservoir of value for thousands of years, and that's not going to change. The utility of diamonds as universally accepted portable wealth is just too much to ignore. Diamonds hold value because we, as a species, have agreed that they do, and though you might not like it, they're as good an instrument of value as anything else.

It's easy, and convenient, to blame "large corporations" for artificially propping up prices, but it just has no basis in fact. 50 years ago, maybe - when De Beers did control the market. But those days are LONG GONE. Today, Alrosa is a larger player than De Beers, and De Beers is fighting it out with Rio Tinto for second place. There are several large players in the rough diamond space, and it is FIERCELY competitive, with razor thin margins. There is no opportunity for monopolistic market-making - the competition will eat your lunch in two seconds. Again, Econ 101 tells us that when there's a competitive space with knowledgeable consumers (and the diamond cutters and dealers buying these stones are very, very knowledgeable), market manipulation of the kind often mentioned here on reddit and elsewhere just isn't possible.

So, rather than blaming "Big Evil Corporations" or more simply "The Man," accept the reality that diamonds are genuinely rare, precious, and valued. Now, that doesn't mean you HAVE TO buy into it. Lots of things are valuable, but that doesn't mean you have to buy them all. But candidly, just posting online that it's "not fair" is some flavor of intellectual laziness, and it seems to me designed to justify buying something else that's easier on the wallet. If that's what you want to do, then go for it! Buy a synthetic, or a sapphire, or a topaz, or any number of semi-precious stones that can be had for a few bucks. Or don't buy a ring at all! But don't pretend you're doing it out of some kind of ivory tower ethics or to "beat the system." Just acknowledge that you don't want to spend the money on a diamond and move on with your life. Diamonds ARE worth what they cost - the market validates that every day. After all, ANYTHING is worth what people are willing to pay for it, and people are certainly willing to pay for diamonds. So, shop wisely (I strongly recommend expert help!), get the best value you can, and make your purchasing decision.

I hope that helps! For further education, I'd recommend you scroll through my post history. I've been very active on reddit for a long time, and there's a wealth of stuff (and, I'm sure, a whole bunch of useless crap I typed out some time!) there. And feel free to reach out to me with any questions, any time.

Good luck!

The topic of LG vs. natural has been debated VERY extensively on this sub. Read through some post history and you'll see.

I work on the natural side of things (I just don't buy into the value proposition of LGs at this point), but there are valid arguments on both sides of it.

One piece of advice that's relevant either way. Set your budget and some expectations (size, shape, quality) BEFORE talking to a salesperson. Know what you want and what you expect. Of course, there's room to learn and change your mind, but it's pretty easy these days to have some benchmarks of value so you don't get taken for a ride.

Good luck!

It really varies, and it depends more on your cost basis than anything else. I've bought stones back from clients at 20% less than they paid, and at 20% MORE than they paid, as the market varied. I have one stone that I've now bought and sold 4 times, each time for more, as its value has continued to rise.

But I'm a dealer. Retailers have higher markups than I do, so if you buy at retail, you'll get hurt more if you try to sell than if you buy the sharpest possible way.

Actually, I think it's MOST valid for an engagement ring. Nobody ever thinks about selling an engagement ring the day they buy it - but LOTS of people do that! There are many reasons that can happen - upgrading to a larger stone (happens all the time!), financial hardship, end of relationship (sad to think about, but it happens!), etc. And even if you never sell your ring, one day it'll be part of your estate plan and your grandkids will own it. When something is destined to become a family heirloom, I think it should be valuable intrinsically as well as sentimentally.

I had an interesting experience today that I thought you guys should know about. I'm working with a client, and he's savvy, so he's also checking all the big sites (BN, JA, etc.). He found a stone on a site (not BN or JA, but another big one) for a price that seemed too good to be true. So, I tracked down the stone through wholesale trading sites, and lo and behold - it was more expensive than on the consumer site.

I called the owner (a dealer in NYC) and asked him to explain. He said he had not authorized the site to list his diamond, had no dealings with them, and would not sell the stone for the price they had listed. His words were, "If they want to buy it and sell it to the consumer for a loss, I guess they can do that, but I won't sell it for the price on that site."

So, I called the consumer site and asked for more details on the stone. And - wouldn't you know it? - they had "just sold it." But they were more than happy to show me other, more expensive/less appealing options.

So, to all you shoppers out there, buyer beware! If a deal seems too good to be true, it probably is.

Thanks for the shoutout! Be careful about the "1.99 deal" though. 1.99s are very hard to come by, and for good reason. They basically only happen when a cutter making a 2ct screws up, or when a 2ct is chipped and needs to be repaired. Quite often, the cut is compromised in these stones. Also, lots of people seek them out, believing they're a deal, so I've actually seen 1.99s priced ABOVE similar 2cts, just because they're desirable.

But your general point (look for something slightly smaller) stands. Remember, the price of diamonds increases exponentially with size, so varying the size a little (up or down!) can change the price a lot.

OK, great. In that case, the only thing to nitpick is the price. If you figure $6-7k for the side stones and setting (should be about right), that means you're paying $19k for the center. That's pretty steep in my opinion. I'd like to see this piece closer to $23k or so. So, if you have room to negotiate with your jeweler, give it a shot. On the other hand, if your jeweler has added a lot of value with his work, he's entitled to a profit... So it's up to you. This price isn't crazy - it's just not an awesome deal.

Good luck!

This is all about buying a stone right in the first place! Buy it at full retail price (Tiffany, Harry Winston, etc.), and you're gonna have a bad time. But go to a good private jeweler or dealer, and buy the stone without the retail markup, and you can do really well. In the long term, the stone will hold value and appreciate.

Bear in mind that some of the largest mines in the world are scheduled to close within the next 18 months - we've mined them dry. There are none left to find there. In fact, global mining production for diamonds peaked in 2006, and has been decreasing every year since.

At the same time, demand is skyrocketing. The last 20 years have seen the emergence of a massive middle class in India and China (among other places), and those people want diamonds and are willing to pay dearly to get them.

So, decreasing supply, increasing demand... You do the math!

Look and appearance are usually the same. Occasionally the trained eye can identify an LG, but it generally takes equipment to do so.

As for retained value, that's a common sentiment. Nobody thinks about selling a diamond the day they buy it - but lots of people do that! There are many reasons it can happen - some good, some bad (upgrade, end of relationship, financial hardship, change of taste). And even if you never sell it, one day your engagement ring will be part of your estate plan. Personally, I like the idea of the family heirloom being financially valuable as well as emotionally so.

I have posted extensively on this topic. Check my post history!

Well, I've been in the diamond industry for 16 years, and my family has been in it for almost a hundred years. I've bought and sold tens of millions of dollars in stones (maybe hundreds by now). I own Concierge Diamonds in Los Angeles, CA - we're doing pretty well. I've worked with thousands of redditors over the years on engagement rings, and I hope I don't sound like a jerk when I say I'm fairly well respected in this sub.

Check my post history!

I don't mean to be aggressive or rude - sorry if it came off that way. But I do know what I'm talking about when it comes to diamonds.

There really isn't a consistent definition of "wholesale" in the jewelry business. But I think it's easy to identify who is retail and who isn't.

Do you have a storefront? Showcases? Lights? Are you open to the public, so anyone can just walk in and browse? Most importantly, are your goods priced at retail price? If so, you're a retailer.

Are you open by appointment only? Do you have an office rather than a store? Are your goods priced similar to online, rather than similar to storefront? Do you specialize in one kind of jewelry (diamonds, sapphires, etc.?). You're a private dealer.

Do you sell to other professionals (retailers, dealers, etc.)? You're a wholesaler.

For me, the last two definitions fit. So I'm a wholesaler and private dealer.

Thanks for the support! I really appreciate it.

I buy from and sell to Israeli dealers all the time. No, you won't get much of an advantage. There is a wholesale trading center in Ramat Gan, but without credentials you won't get into the building. It is considered among the most secure non-military buildings in the world.

Besides, any small price advantage you might get is more than outweighed by your inability to get service in the future.

Go to the beach instead! Tel Aviv is an amazing city. Enjoy it!

The best way to have reassurance is to look at a bunch of stones and compare. Ask the jeweler to see "cheap GSI1s" and "top GSI1s" (for example). Talk it through with him. What does your jeweler say when you ask this question?

At the end of the day, ask yourself, do I think this jeweler is an expert (so he's buying the stones right) who's treating me fairly (so he's not marking up too much)? If the answer is yes to both questions, it should be simple. If you don't trust the jeweler, don't buy anything from him, regardless of price. And if you do trust him, trust him!

When you buy ANYTHING, the person selling it is making a profit! Why would diamonds be any different?

As for how much that profit is, it depends how aggressive the seller is. Some are better than others. As in so many things, the value you retain is based on your cost basis, your commitment to holding, and your savvy when selling. That's the world, my friend.

I have posted extensively on this topic. Check my post history. You might also want to look up .

The problem is that none of us knows they definitively. Nobody PLANS to sell when they're buying, but a lot of people do wind up doing so. There are a lot of reasons people wind up parting from their stones (divorce, upgrade, financial hardship, etc.), and you never know.

And even if you never sell, your next of kin might! There aren't a lot of things you buy when you're young that will go into your estate plan, but an engagement ring will!

Because a treated stone is not handled the same way as a natural one in the business. It's not that treating a stone diminishes the value, it's that the stone is worth less to begin with - the treatment just hides the defects of the stone. But they're still there!

Also, the market for treated stones is much, much, MUCH smaller than the market for natural stones. So if you ever need to sell or trade, virtually no one will take it. I wouldn't buy any treated stone for any price - because I have no way to sell them.

At your price point, you can get an AMAZING natural stone. Don't compromise.

What have you been shown?

Yes, it's a big deal. Not only is it worth, way, way, WAY less than it would be natural (so it's overpriced at this price), but the secondary market is practically nonexistent, so if you ever want to sell it (trade in, upgrade, etc.) you will have a very hard time.

I buy diamonds every day, and I literally wouldn't buy this stone for $1. I'd never be able to sell it.

By the way, nobody PLANS to sell their ring the day they buy it... But people sometimes wind up doing so!

I get where you're coming from, I do. That's the struggle when you can't see a lot of good stones in person. Ideally, I'd tell you to find a good dealer (locally or elsewhere) who can act as your proxy. Then you can see unbranded stones which will look great, without the branded prices.

Or, you could travel to a major diamond center (NYC, LA, London, Tel Aviv, etc.) and see for yourself. You'd probably save enough to pay for the trip!

They should be useful, but they're often misleading. They can lead you to think differences between two stones are MUCH more significant than they really are.

These images are typically used a as a "wedge" do differentiate between two very similar stones, to justify a high price for the one someone wants to sell.

So, what do you do? Look at the stones with your own two eyes (or at videos of them in natural light if you can't see them in person), and see what YOU like. Not what you're "supposed to" like - what you actually like. If one stone is "super ideal" and the other is "only" excellent, but you see no difference, why would you pay for it?

I definitely think you should. Unfortunately, your local market there tends to be really expensive, so searching abroad may be worthwhile. I actually once had a client (a redditor!) looking for a $20k stone who wound up buying it from me, and coming to LA to pick it up. He told me he brought his GF with him, and they took a 10 day trip in California with the money they saved buying in the USA instead of locally. Crazy.

Lots of jewelers will take a trade in... But how do you make sure you get a good value? Two ways.

1. Get it certified. Send it to GIA and come armed with a certificate. Then you can eyeball the market value by searching for similar stones.

1. Go into a jewelry store or two, show them the stone, and tell them you want to BUY another one just like it. Tell them it's your sister's and your GF wants one like it. Or tell them you want to match it to make earrings. Whatever. Just ask them how much THEY would sell YOU a stone like that for. Then you can ask them if they will give you 20-25% less in credit (so they can make a profit when they sell it) if you sell them yours.

Good luck!

In a 3 carat, an I1 is almost certainly (98%) not going to be eye-clean. With an SI2, you have a 50/50 shot of a stone being eye-clean. SI1 gives you an 80+% chance.

As for what resource I'm using, it's a combination of experience (I know what stones like this should sell for) and research (I looked for comparable stones on wholesale listing services, and this is more expensive than what I'm finding).

I DEFINITELY wouldn't buy a stone like this without seeing it, and if I was going to buy it, I would push HARD on the price. I think this is significantly too much or the stone.

Was it the intergem show?

It can't hurt to try. Bring cash, and know in advance how much you want to pay and exactly what you want to get. You can find deals at these shows, but if you're not a professional you can also get yourself into trouble.

Bear in mind as you shop that it's not just about "the deal." It's about finding a jeweler you can trust. Someone who stands behind his product, keeps his word, and will be your advocate long-term.

Good luck!